Competition between two supply chains with demand dependent on price and lead time: A Games Theory approach

AbstractToday, the use of game theory in supply chain management is very common. Game theory is used not only in pricing goods in the supply chain, but also in advertising discussions and examining the interaction of supply chain members. In this paper, the competition between two supply chains, each of which includes a manufacturer and a distributor, is considered. Demand for goods is a function of price and lead time. Competition under the game scenario is considered nonecooperation and with cooperation. Three types of scenarios have been developed under the game theory none cooperation (Nash-Stackelberg) and with different for analysis and decision-making related to price, lead time and shipping size. A unique equilibrium is shown in all games and detailed formulas are provided to calculate the optimal decisions of each chain. Numerical examples and analysis of the results of useful management insight to select the best strategies for chains in different market and operational environments.