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Games with incomplete information: A simplified exposition with inventory management applications

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  • Wu, H.
  • Parlar, M.

Abstract

In most existing literature in supply chain management it is assumed that the players possess complete information about the game, i.e., the players' payoff (objective) functions are assumed to be common knowledge. For static and dynamic games with complete information, the Nash equilibrium and subgame perfect equilibrium are the standard solution concepts, respectively. For static and dynamic games with incomplete information, the Bayesian Nash equilibrium and perfect Bayesian equilibrium, respectively, are used as solution concepts. After presenting a brief review of the static and dynamic games under complete information, the application of these two games in inventory management is illustrated by using a single-period stochastic inventory problem with two competing newsvendors. Next, we illustrate the Bayesian Nash and perfect Bayesian equilibrium solution concepts for the static and dynamic games under incomplete information with two competing newsvendors. The expository nature of our paper may help researchers in inventory/supply chain management gain easy access to the complicated notions related to the games played under incomplete information.

Suggested Citation

  • Wu, H. & Parlar, M., 2011. "Games with incomplete information: A simplified exposition with inventory management applications," International Journal of Production Economics, Elsevier, vol. 133(2), pages 562-577, October.
    • Handle: RePEc:eee:proeco:v:133:y:2011:i:2:p:562-577
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    References listed on IDEAS

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    Cited by:

    1. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).
    2. Egri, Péter & Kis, Tamás & Kovács, András & Váncza, József, 2014. "An inverse economic lot-sizing approach to eliciting supplier cost parameters," International Journal of Production Economics, Elsevier, vol. 149(C), pages 80-88.
    3. Mahmut Parlar, 2023. "Model Development with Maple in PhD-Level Management Science Courses: A Personal Account," SN Operations Research Forum, Springer, vol. 4(1), pages 1-24, March.

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