Zhu, C: Purchasing, Pricing and Investment Decision inManufa

The reliability and quality of suppliers‘ components are inevitably two factors that impact the performance of the supply chain. Thus this book is divided into two parts. In the first part, we build a model for a two echelon supply chain system in which a single manufacturer sells his product to a market with stochastic demand. A group of suppliers provide essential components with stochastic reliability for the manufacturer. We first analyze the manufacturer‘s optimal ordering quantity decision. Then we investigate the suppliers‘ price competition by non-cooperative game theory. In the second part, we model a two echelon assembly system which faces deterministic demand affected by the market price and product quality. In the first stage, the firms decide on investment in the quality of the components or the final product to stimulate the market. After the investment, in the second stage, each firm decides on the wholesale and market price. We identify the existence of Nash equilibrium in each stage through potential functions. Moreover, we find that the investment competition with a leader can always benefit the whole system compared with simultaneous competition.