Journal of Industrial and Management Optimization (JIMO)

Supply chain inventory management via a Stackelberg equilibrium

Pages: 81 - 94, Volume 2, Issue 1, February 2006      doi:10.3934/jimo.2006.2.81

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Yeong-Cheng Liou - Department of Information Management, Cheng Shiu University, No.840, Chengcing Rd., Niaosong Township, Kaohsiung County 833, Taiwan, R.O.C., Taiwan (email)
Siegfried Schaible - A. G. Anderson Graduate School of Management, University of California, Riverside, CA 92521, United States (email)
Jen-Chih Yao - Department of Applied Mathematics, National Sun Yat-Sen University, Kaohsiung, Taiwan 80424, R.O.C., Taiwan (email)

Abstract: In this paper we consider one-buyer, one-seller, finite horizon, multi-period inventory models in which the economic order quantity is integrated with the economic production quantity (EOQ-EPQ in short). We introduce the Stackelberg equilibrium framework in which the objective is to maximize the vendor's total benefit subject to the minimum total cost that the buyer is willing to incur. Some existence results, optimality conditions and the optimal replenishment policy under the Stackelberg equilibrium concept are obtained and a numerical algorithm and examples are presented to find the optimal replenishment policy in practice.

Keywords:  Inventory models, Stackelberg equilibrium, economic order quantityeconomic production quantity.
Mathematics Subject Classification:  MSBM10.

Received: August 2005;      Revised: November 2005;      Available Online: January 2006.