Article ID: | iaor19971863 |
Country: | Netherlands |
Volume: | 68 |
Issue: | 1 |
Start Page Number: | 3 |
End Page Number: | 31 |
Publication Date: | Nov 1996 |
Journal: | Annals of Operations Research |
Authors: | Bai Sherman X. |
Keywords: | production, game theory |
This paper studies the production scheduling problem in a competitive environment. Two firms produce the same product and compete in a market. The demand is random and so is the production capacity of each firm, due to random breakdowns. The paper considers a finite planning horizon. The scheduling problem is formulated as a finite dynamic game. Algorithms are developed to determine the security, hazard, and Nash policies. Numerical examples are discussed. A single-firm optimization model is also analyzed and it is observed that the production control policy from the single-firm optimization model may not perform well in a competitive environment.