IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2308.00681.html
   My bibliography  Save this paper

Increasing Supply Chain Resiliency Through Equilibrium Pricing and Stipulating Transportation Quota Regulation

Author

Listed:
  • Mostafa Pazoki
  • Hamed Samarghandi
  • Mehdi Behroozi

Abstract

Supply chain disruption can occur for a variety of reasons, including natural disasters or market dynamics for which resilient strategies should be designed. If the disruption is profound and with dire consequences for the economy, it calls for the regulator's intervention to minimize the impact for the betterment of the society. This paper considers a shipping company with limited capacity which will ship a group of products with heterogeneous transportation and production costs and prices, and investigates the minimum quota regulation on transportation amounts stipulated by the government. An interesting example can happen in North American rail transportation market, where the rail capacity is used for a variety of products and commodities such as oil and grains. Similarly, in Europe supply chain of grains produced in Ukraine is disrupted by the Ukraine war and the blockade of sea transportation routes, which puts pressure on rail transportation capacity of Ukraine and its neighboring countries to the west that needs to be shared for shipping a variety of products including grains, military, and humanitarian supplies. Such situations require a proper execution of government intervention for effective management of the limited transportation capacity to avoid the rippling effects throughout the economy. We propose mathematical models and solutions for the market players and the government in a Canadian case study. Subsequently, the conditions that justify government intervention are identified, and an algorithm to obtain the optimum minimum quotas is presented.

Suggested Citation

  • Mostafa Pazoki & Hamed Samarghandi & Mehdi Behroozi, 2023. "Increasing Supply Chain Resiliency Through Equilibrium Pricing and Stipulating Transportation Quota Regulation," Papers 2308.00681, arXiv.org, revised Oct 2023.
    • Handle: RePEc:arx:papers:2308.00681
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2308.00681
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alain Haurie & Jacek B Krawczyk & Georges Zaccour, 2012. "Games and Dynamic Games," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8442, February.
    2. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    3. Fang Zong & Yanan He & Yixin Yuan, 2015. "Dependence of Parking Pricing on Land Use and Time of Day," Sustainability, MDPI, vol. 7(7), pages 1-21, July.
    4. Mohammad Tamannaei & Hamid Zarei & Sajede Aminzadegan, 2021. "A Game-Theoretic Approach to the Freight Transportation Pricing Problem in the Presence of Intermodal Service Providers in a Competitive Market," Networks and Spatial Economics, Springer, vol. 21(1), pages 123-173, March.
    5. Isaac, R Mark, 1991. "Price Cap Regulation: A Case Study of Some Pitfalls of Implementation," Journal of Regulatory Economics, Springer, vol. 3(2), pages 193-210, June.
    6. Azadian, Farshid & Murat, Alper, 2018. "Service location grouping and pricing in transportation: Application in air cargo," European Journal of Operational Research, Elsevier, vol. 267(3), pages 933-943.
    7. Michael Greenstone, 2002. "A Reexamination of Resource Allocation Responses to the 65-MPH Speed Limit," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 271-278, April.
    8. Milovantseva, Natalia & Fitzpatrick, Colin, 2015. "Barriers to electronics reuse of transboundary e-waste shipment regulations: An evaluation based on industry experiences," Resources, Conservation & Recycling, Elsevier, vol. 102(C), pages 170-177.
    9. Breton, Michèle & Kharbach, Mohammed, 2012. "Transportation and storage under a dynamic price cap regulation process," Energy Economics, Elsevier, vol. 34(4), pages 918-929.
    10. Zhou, Wei-Hua & Lee, Chung-Yee, 2009. "Pricing and competition in a transportation market with empty equipment repositioning," Transportation Research Part B: Methodological, Elsevier, vol. 43(6), pages 677-691, July.
    11. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    12. Toptal, Aysegül & Bingöl, Safa Onur, 2011. "Transportation pricing of a truckload carrier," European Journal of Operational Research, Elsevier, vol. 214(3), pages 559-567, November.
    13. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    14. M.E. Beesley & S.C. Littlechild, 1989. "The Regulation of Privatized Monopolies in the United Kingdom," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 454-472, Autumn.
    15. Chen, Yiwei & Wang, Hai, 2018. "Pricing for a Last-Mile Transportation System," Transportation Research Part B: Methodological, Elsevier, vol. 107(C), pages 57-69.
    16. Adler, Nicole & Brudner, Amir & Proost, Stef, 2021. "A review of transport market modeling using game-theoretic principles," European Journal of Operational Research, Elsevier, vol. 291(3), pages 808-829.
    17. Kang, Jaesung & Weisman, Dennis L. & Zhang, Mingyuan, 2000. "Do consumers benefit from tighter price cap regulation?," Economics Letters, Elsevier, vol. 67(1), pages 113-119, April.
    18. O. Palancı & S. Z. Alparslan Gök & M. O. Olgun & G.-W. Weber, 2016. "Transportation interval situations and related games," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(1), pages 119-136, January.
    19. Chang, Tang-Hsien & Tseng, Jen-Sung & Hsieh, Tung-Hung & Hsu, Yu-Ting & Lu, Ying-Chih, 2018. "Green transportation implementation through distance-based road pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 53-64.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pazoki, Mostafa & Samarghandi, Hamed & Behroozi, Mehdi, 2024. "Increasing supply chain resiliency through equilibrium pricing and stipulating transportation quota regulation," Omega, Elsevier, vol. 127(C).
    2. Breton, Michèle & Kharbach, Mohammed, 2012. "Transportation and storage under a dynamic price cap regulation process," Energy Economics, Elsevier, vol. 34(4), pages 918-929.
    3. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    4. Paul L. Joskow, 2006. "Incentive Regulation for Electricity Networks," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(2), pages 3-9, 07.
    5. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    6. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
    7. Bonatti, Alessandro & Hörner, Johannes, 2017. "Learning to disagree in a game of experimentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 234-269.
    8. Dionne, G. & Doherty, N., 1991. "Adverse Selection In Insurance Markets: A Selective Survey," Cahiers de recherche 9105, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    9. Abderrahmane Ziad, 2003. "Nash Equilibria in Pure Strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 311-317, July.
    10. Noel Uri, 2003. "The Effect of Incentive Regulation in Telecommunications in the United States," Quality & Quantity: International Journal of Methodology, Springer, vol. 37(2), pages 169-191, May.
    11. Allison, Blake A. & Bagh, Adib & Lepore, Jason J., 2018. "Sufficient conditions for weak reciprocal upper semi-continuity in mixed extensions of games," Journal of Mathematical Economics, Elsevier, vol. 74(C), pages 99-107.
    12. Fleckinger, Pierre & Lafay, Thierry, 2010. "Product flexibility and price competition in Hotelling's duopoly," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 61-68, July.
    13. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Benchmarking and Regulation in the Electricity Distribution Sector," CEPE Working paper series 07-54, CEPE Center for Energy Policy and Economics, ETH Zurich.
    14. Blázquez de Paz, Mario, 2018. "Electricity auctions in the presence of transmission constraints and transmission costs," Energy Economics, Elsevier, vol. 74(C), pages 605-627.
    15. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes," Discussion Papers 04-13, Indian Statistical Institute, Delhi.
    16. Becchetti, Leonardo & Palestini, Arsen & Solferino, Nazaria & Elisabetta Tessitore, M., 2014. "The socially responsible choice in a duopolistic market: A dynamic model of “ethical product” differentiation," Economic Modelling, Elsevier, vol. 43(C), pages 114-123.
    17. Bester, Helmut & Petrakis, Emmanuel, 1995. "Price competition and advertising in oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1075-1088, June.
    18. Bingtuan Gao & Tingting Ma & Yi Tang, 2015. "Power Transmission Scheduling for Generators in a Deregulated Environment Based on a Game-Theoretic Approach," Energies, MDPI, vol. 8(12), pages 1-15, December.
    19. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.
    20. Bernhardt, Dan & Koufopoulos, Kostas & Trigilia, Giulio, 2022. "Separating equilibria, underpricing and security design," Journal of Financial Economics, Elsevier, vol. 145(3), pages 788-801.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2308.00681. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.