Inventory control under substitutable demand: A stochastic game application

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2002-06-01

Author

Avşar, Zeynep Müge

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Substitutable product inventory problem is analyzed using the concepts of stochastic game theory. It is assumed that there are two substitutable products that are sold by different retailers and the demand for each product is random. Game theoretic nature of this problem is the result of substitution between products. Since retailers compete for the substitutable demand, ordering decision of each retailer depends on the ordering decision of the other retailer. Under the discounted payoff criterion, this problem is formulated as a two-person nonzero-sum stochastic game, In the case of linear ordering cost, it is shown that there exists a Nash equilibrium characterized by a pair of stationary base stock strategies for the infinite horizon problem. This is the unique Nash equilibrium within the class of stationary base stock strategies. (C) 2002 Wiley Periodicals, Inc.

Subject Keywords

Management Science and Operations Research, Modelling and Simulation, Ocean Engineering

URI

https://hdl.handle.net/11511/34519

Journal

NAVAL RESEARCH LOGISTICS

DOI

https://doi.org/10.1002/nav.10018

Collections

Department of Industrial Engineering, Article

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Citation Formats

Z. M. Avşar, “Inventory control under substitutable demand: A stochastic game application,” NAVAL RESEARCH LOGISTICS, pp. 359–375, 2002, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/34519.