Coordination Of Lot-Sizing Decisions In A Game Theoretical Framework Part 2

Individual decision making in a supply chain will often not lead to an outcome in which total profit is maximized. Additional action needs to be taken to increase overall efficiency. We investigate the coordinating effects of two mechanisms: a quantity discount schedule and a holding cost compensation scheme. Each mechanism is analysed in an environment with continuous demand and an infinite planning horizon against the background of non-cooperative game theory. Full coordination is achieved with the first mechanism. The simulation study shows that the performance of the alternative strongly depends on each actor's cost parameters.