Supply chain network design under profit maximization and oligopolistic competition

Supply chain network design under profit maximization and oligopolistic competition

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Article ID: iaor20101232
Volume: 46
Issue: 3
Start Page Number: 281
End Page Number: 294
Publication Date: May 2010
Journal: Transportation Research Part E
Authors:
Abstract:

In this paper, we model the supply chain network design problem with oligopolistic firms who are involved in the competitive production, storage, and distribution of a homogeneous product to multiple demand markets. The profit-maximizing firms select both the capacities associated with the various supply chain network activities as well as the product quantities. We formulate the governing Nash–Cournot equilibrium conditions as a variational inequality problem and identify several special cases of the model, notably, a generalization of a spatial oligopoly and a classical oligopoly problem to include design capacity variables. The proposed computational approach, which is based on projected dynamical systems, fully exploits the network structure of the problems and yields closed form solutions at each iteration. In order to illustrate the modeling framework and the algorithm, we also provide solutions to a spectrum of numerical supply chain network oligopoly design examples.

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