Supply chains competition under uncertainty concerning player's strategies and customer choice behavior: A generalized Nash game approach

Abstract

Decision makers in a supply chain confront two main sources of uncertainty in market environment including uncertainty about customers purchasing behaviors and rival chains strategies. Focusing on competition between two supply chains, it is considered that each customer as an independent player selects products of these chains based on random utility model. Similar to quantal response equilibrium approach, we take account of customer rationality as an exogenous parameter. Moreover, it is assumed that decision makers in a supply chain can perceive an estimation of rival strategies about price and service level formulated in the model by fuzzy strategies. In the competition model, chains decision makers consider a subjective probability for wining each customer which is formulated by coupled constraints. These constraints connect chains strategies regarding to each customer and yield a generalized Nash equilibrium problem. Since price cutting and increasing service level are main responses to rival supply chain, after calculating optimal strategies, we show that more efficient responses depend on customer preferences. Copyright © 2012 A. Hafezalkotob and A. Makui.