Noncooperative Games for Subcontracting Operations

Noncooperative Games for Subcontracting Operations

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Article ID: iaor20131102
Volume: 15
Issue: 1
Start Page Number: 148
End Page Number: 158
Publication Date: Dec 2013
Journal: Manufacturing & Service Operations Management
Authors:
Keywords: noncooperative games, operations management, subcontracting, Nash equilibrium
Abstract:

Consider a set of manufacturers, all of which can subcontract part of their workload to a third party. For simplicity, we assume that every manufacturer as well as the third party each possess a single production facility. Each manufacturer has to decide the amount of workload to be subcontracted so as to minimize the completion time of his in‐house and subcontracted workloads. In an effort to provide good service to all, the third party gives priority to manufacturers whose subcontracted workload is small. This incentive scheme forces manufacturers to compete for position in the third‐party processing sequence. We develop pure Nash equilibria schedules under three distinct protocols for production.

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