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Capacity games for partially complementary products under multivariate random demands

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  • Xiang Fang

Abstract

In this study, we consider n firms, each of which produces and sells a different product. The n firms face a common demand stream which requests all their products as a complete set. In addition to the common demand stream, each firm also faces a dedicated demand stream which requires only its own product. The common and dedicated demands are uncertain and follow a general, joint, continuous distribution. Before the demands are realized, each firm needs to determine its capacity or production quantity to maximize its own expected profit. We formulate the problem as a noncooperative game. The sales price per unit for the common demand could be higher or lower than the unit price for the dedicated demand, which affects the firm's inventory rationing policy. Hence, the outcome of the game varies. All of the prices are first assumed to be exogenous. We characterize Nash equilibrium(s) of the game. At the end of the article, we also provide some results for the endogenous pricing. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 59: 146–159, 2012

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  • Xiang Fang, 2012. "Capacity games for partially complementary products under multivariate random demands," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(2), pages 146-159, March.
    • Handle: RePEc:wly:navres:v:59:y:2012:i:2:p:146-159
    DOI: 10.1002/nav.21478
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    1. Xiao Huang & Mahesh Nagarajan & Greys Sošić, 2013. "Some implications of pricing bundles," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(3), pages 237-250, April.

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