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Negotiation mechanisms for an order subcontracting and scheduling problem

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  • Wang, Xiuli
  • Geng, Sujie
  • Cheng, T.C.E.

Abstract

We consider a decentralized decision-making environment in which a firm and its subcontractor make decisions on subcontracting heterogeneous orders for processing with private information. We design two market-like negotiation mechanisms that adopt the multi-round ascending pricing framework under two negotiation protocols, labeled as Protocols 1 and 2. Applying game-theoretic and combinatorial optimization approaches, we analyze the decision behaviors of both players and derive the final negotiation outcomes. We find that the negotiation mechanism under Protocol 1 cannot guarantee the existence of the equilibrium price, while the negotiation mechanism under Protocol 2 result in equilibrium solutions. For some special cases, we investigate the system performance bounds under the two negotiation mechanisms and find that the performance bounds under the former are better than those under the latter.

Suggested Citation

  • Wang, Xiuli & Geng, Sujie & Cheng, T.C.E., 2018. "Negotiation mechanisms for an order subcontracting and scheduling problem," Omega, Elsevier, vol. 77(C), pages 154-167.
    • Handle: RePEc:eee:jomega:v:77:y:2018:i:c:p:154-167
    DOI: 10.1016/j.omega.2017.06.005
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    References listed on IDEAS

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    1. Wang, Xiuli & Zhu, Qianqian & Cheng, T.C.E., 2015. "Subcontracting price schemes for order acceptance and scheduling," Omega, Elsevier, vol. 54(C), pages 1-10.
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    2. Mohammadali S. Monfared & Sayyed Ehsan Monabbati & Mahsa Mahdipour Azar, 2020. "Bi-objective optimization problems with two decision makers: refining Pareto-optimal front for equilibrium solution," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 42(2), pages 567-584, June.
    3. Basu, Arnab & Jain, Tarun & Hazra, Jishnu, 2018. "Supplier selection under production learning and process improvements," International Journal of Production Economics, Elsevier, vol. 204(C), pages 411-420.

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