Multiperiod Models with Capacities in Competitive Supply Chain

Abstract

This paper considers a supply chain setting where several capacitated suppliers compete for orders from a single retailer in a multiperiod environment. At each period, the retailer places orders to the suppliers in response to the prices they announce. Each supplier has a fixed capacity. We consider a make‐to‐stock setting where the retailer can carry inventory. The retailer faces exogenous, price‐dependent demand. We study the problem using ideas from fluid models. In particular, we (i) analyze when there are pure equilibrium policies in this setting and characterize the structure of these policies; (ii) consider coordination mechanisms; and (iii) present some preliminary computational results. We also consider a modified model that uses option contracts to coordinate the supply chain.

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