A game-theoretic framework for optimizing supply chain coordination and production

Masoud Narenji, Armin Mahmoodi*, Milad Jasemi, Seyed Mojtaba Sajadi, Maryam Amini

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This research introduces a groundbreaking competition concept for supply chains, utilizing the Stackelberg game method to address internal entity interactions. In practical scenarios, chain components often partially cooperate, prioritizing individual benefits without a holistic understanding of the entire chain and market dynamics. Achieving complete chain coordination is challenging, expensive, and requires high-level agreement. Our study presents a simultaneous competition model for two supply chains and their internal entities, considering heterogeneous customers in price and time-sensitive classes. Each chain serves regular and special customers with varied delivery times and pricing. This research aims to investigate how competition among supply chains under various conditions impacts metrics like performance, market share and profits. These conditions include collaboration strategy (Centralized or Decentralized Structure) and production approach (Shared or Dedicated Capacity for specific customers). We employed scenario analysis with the Stackelberg Game framework to study strategic and policy choices' impact on supply chain conditions. We identified 10 distinct scenarios for analysis. Using the Stackelberg model, we iteratively solved the developed models until they reached equilibrium in price and delivery time. Our findings suggest that chains benefit more from a cooperative strategy with a Centralized Structure. Market behavior influences the chosen production approach, where adopting a dedicated capacity policy can lead to increased market share and profits if the market leader does so. Alternative strategies result in competitive stances and reduced returns for both chains.

Original languageEnglish
Article number100139
Number of pages25
JournalSupply Chain Analytics
Volume11
Early online date19 Jun 2025
DOIs
Publication statusE-pub ahead of print - 19 Jun 2025

Bibliographical note

Copyright © 2025 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license (https://creativecommons.org/licenses/by/4.0/).

Keywords

  • Delivery time management
  • Game theory applications
  • Market competition
  • Pricing analytics
  • Production optimization
  • Supply chain strategy

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