A production control problem in competition: The infinite horizon case

A production control problem in competition: The infinite horizon case

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Article ID: iaor19961983
Country: United States
Volume: 1
Issue: 1
Start Page Number: 49
End Page Number: 66
Publication Date: Apr 1995
Journal: International Journal of Operations and Quantitative Management
Authors: ,
Keywords: scheduling, programming: dynamic, game theory
Abstract:

The authors study a production control problem in a competitive environment. Two firms produce identical product and compete with each other in a market. The demand is random as well as the production capacity of each firm. The daily demand is randomly allocated to each firm with a given probability. Each firm has to decide how much it will produce daily to maximize its profit without knowing what its competitor is doing. The authors consider the number of stages being infinite. The control problem is formulated as an infinite dynamic game with average discounted payoffs. Algorithms are developed to determine the security, hazard, and Nash policies. Numerical cases are presented to observe the system behavior under those policies. Comparisions are made with the optimal solution from a single-firm model.

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