Incentive compatible mechanisms for decentralised supply chain formation

Incentive compatible mechanisms for decentralised supply chain formation

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Article ID: iaor200968958
Country: United Kingdom
Volume: 6
Issue: 1
Start Page Number: 27
End Page Number: 53
Publication Date: May 2009
Journal: International Journal of Operational Research
Authors: , , , ,
Abstract:

In this paper, we consider a decentralised supply chain formation problem for multi-echelon supply chains when the managers of the individual echelons are rational and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance. In this paper, we develop a mechanism design framework for addressing this problem and propose two incentive compatible mechanisms: Supply Chain Formation – Dominant Strategy Incentive Compatibility (SCF-DSIC) and Supply Chain Formation – Bayesian Incentive Compatibility (SCF-BIC). We illustrate the efficacy of the proposed methodology using the example of a three echelon manufacturing supply chain.

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