Dynamic Competitive Supply Chain Network Design with Price Dependent Demand and Huff Utility Function

This paper develops a two-stage model to consider a franchise/franchisee environment in which supply chains are simultaneously entering the untapped market to produce either identical or highly substitutable products and give franchise to franchisees. Customer demand is elastic, price dependent and customer utility function is based on Huff gravity rule model. The supply chains, in the first stage, shape their networks and set the market prices based on dynamic games. The franchisees, in the second stage, specify their attractiveness levels and set the locations of their retailers in simultaneous games. Possibility theory was also applied to cope with uncertainty. Finally, we applied our model to a real world problem, discussed the results, conducted some sensitivity analyses, and gained some managerial insights.

Keywords:

Bi-level programming , simultaneous games , Nash equilibrium , dynamic competitive supply chain network design , Wilson algorithm