Delivery-date and capacity management in a decentralized internal market

We study competitive due-date and capacity management between the marketing and engineering divisions within an engineer-to-order (ETO) firm. Marketing interacts directly with the customers and quotes due-dates for their orders. Engineering is primarily concerned with the efficient utilization of resources and is willing to increase capacity if the cost is compensated. The two divisions share the responsibility for timely delivery of the jobs. We model the interaction between marketing and engineering as a Nash game and investigate the effect of internal competition on the equilibrium decisions. We observe that the internal competition not only degrades the firm's overall profitability but also the serviceability. Finally, we extend our analysis to multiple-job settings that consider both flexible and inflexible capacity.