Game theoretical approach in supply chain management

Zhang, X 2014, Game theoretical approach in supply chain management, Doctor of Philosophy (PhD), Mathematical and Geospatial Sciences, RMIT University.

Document type: Thesis
Collection: Theses

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Title Game theoretical approach in supply chain management
Author(s) Zhang, X
Year 2014
Abstract Supply chain management has been described as an integration of business process that is associated with operational management and marketing problems, such as inventory control, information sharing and supply chain coordination. In contrast, game theory is generally described as the study of mathematical models concerning how rational individuals and organizations make decisions in a competitive environment. Thus, the theory of non-cooperative and cooperative game became a natural choice used for studying supply chain related problems, especially in analysing the interactions and coordination between supply chain members, due to competition and cooperation existing amongst supply chain members.

Many existing studies in supply chain management made an assumption that shortages are not permitted, which is unrealistic; moreover, these studies totally ignored the consumer who is the terminal member of supply chain. Consumer’s preference and purchasing behaviour are very influential in determining supplier and retailer’s decisions. Conversely, the consumer’s welfare will be affected by supplier and retailer’s decisions. Furthermore, most supply chain games assume symmetric information, which are games whereby each player has the same information on other players’ characteristics such as payoffs, cost structure, decisions or beliefs. Otherwise, we have games with asymmetric information. Under asymmetric information, each player has a type space, which comprises player’s private information known only to player himself but not to the other players. In order to improve supply chain performance under uncertainty, mechanism design, which is a contractual game of asymmetric information, deserves more study. In addition, with three or more players, a comprehensive investigation into how one can obtain the joint probability distribution of players’ types when these types are correlated and each has a different marginal distribution is not available.

In this thesis, we investigated several supply chain models under both symmetric and asymmetric information structure in two categories: non-cooperative game and cooperative game. We first investigated two-player seller-buyer supply chain games with an assumption that shortages are permitted as a decision variable. The effects of shortage to players’ decisions and profits have been investigated through several non-cooperative Stackelberg games and a cooperative game under symmetric information structure. For games under asymmetric information structure, we employed the mechanism design to improve both seller and buyer’s profit. We then proposed a three-person supply chain model by including consumer as a player into seller-buyer supply chain. We studied several non-cooperative games by considering whether there is or isn’t a coalition formed among players. These games are investigated using Stackelberg game under symmetric information. We further developed an allocation scheme for this three-person game in cooperative game setting. We also studied this three-person supply chain game under asymmetric information by introducing Copula method to construct a joint probability distribution regarding players’ types. In addition to the above gems, we provide game theory applications related to two particular supply chain problems: (i) seller-buyer supply chain model with credit option; (ii) Newsvendor problem concerning the quality of the product. Each of these applications studied using non-cooperative Stackelberg game under both symmetric and asymmetric information structure.

Degree Doctor of Philosophy (PhD)
Institution RMIT University
School, Department or Centre Mathematical and Geospatial Sciences
Keyword(s) Game theory
Seller-Buyer supply chain
Three-person supply chain
Stackelberg game
Nash equilibrium
Mechanism design
Non-cooperative and cooperative game
Symmetric and asymmetric information
Credit option
Consumer welfare
Shapley value
Copula function
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Created: Fri, 12 Dec 2014, 09:55:59 EST by Denise Paciocco
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