Coordination Of Lot-Sizing Decisions In A Game Theoretical Framework Part 1

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 an order bonus scheme. Each mechanism is analysed in an environment with continuous demand and an infinite planning horizon against the background of non-cooperative game theory. Whereas the traditional scheme fully aligns the supply chain, the alternative turns out to be completely ineffective.