Improved Profitability and Competition in Two Level Supply Chain by Non-Cooperative Games

This article by modeling a non-cooperative dynamic game tries to improve profitability and competition. This paper has considered how the manufacturer interacts with multiple competitor distributors. Each distributor also determines the optimal distribution price and inventory replenishment policies to maximize their profits. The issue form a non-cooperative dynamic game. Distributors formulate sub-games and finally, have formed the main game with the manufacturer. After designing the game, we determined the Nash equilibrium. We use the concept of "Nash equilibrium" to analyze supplier, manufacturer and distributor strategies in the overall game with the manufacturer. In order to achieve the Nash equilibrium, we use decisions as input parameters. In this case, each player, in addition to making the right decision, can make decisions in order to prepare for possible changes in the decisions of other actors and thereby maximize their profit. As long as actors are reluctant to change their decisions, the process continues. For this purpose, we used analytical method and solution procedure. The results indicate that by increasing the market scale, increasing price sensitivity, increasing the degree of replacement of products, as well as increasing production costs, distributor's profit increases. In this paper, Lingo software was used for calculations.

Keywords:

pricing , Inventory , Non-cooperative games , Nash equilibrium , Supply chain