Capacity reservation for a decentralized supply chain under resource competition: A game theoretic approach

Chao Meng, Benyong Hu, Young Jun Son

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Scopus citations


This paper proposes a capacity reservation mechanism for a single-supplier and multi-manufacturer supply chain. The manufacturers first determine the production capacity they should reserve from the supplier, and then realize their reservations and place corresponding supplementary orders within a realization time window. The supplier builds its regular production capacity according to the reservations that have been received, and emergency production capacity for orders that exceed its regular capacity. Towards this end, we develop an analytical model to quantify the manufacturers' optimal capacity reservation quantities and realization times, as well as the supplier's optimal regular capacity. Given regular production capacity competition, a Cellular Automata (CA) simulation model is developed to resolve the analytical intractability of reservation realization time by modeling the manufacturers in an N-person game and identifying the convergence condition. Experiment results indicate that the proposed capacity reservation mechanism outperforms the traditional wholesale price contract in a decentralized supply chain.

Original languageEnglish (US)
Title of host publicationProceedings of the 2014 Winter Simulation Conference, WSC 2014
EditorsAndreas Tolk, Levent Yilmaz, Saikou Y. Diallo, Ilya O. Ryzhov
PublisherInstitute of Electrical and Electronics Engineers Inc.
Number of pages12
ISBN (Electronic)9781479974863
StatePublished - Jan 23 2015
Event2014 Winter Simulation Conference, WSC 2014 - Savannah, United States
Duration: Dec 7 2014Dec 10 2014

Publication series

NameProceedings - Winter Simulation Conference
ISSN (Print)0891-7736


Other2014 Winter Simulation Conference, WSC 2014
Country/TerritoryUnited States

ASJC Scopus subject areas

  • Software
  • Modeling and Simulation
  • Computer Science Applications


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