Purchasing, Pricing and Investment Decision inManufacture System

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The reliability and quality of suppliers' componentsare inevitably two factors that impact theperformance of the supply chain. Thus this book is divided into two parts. In thefirst part, we build a model for a two echelon supplychain system in which a single manufacturer sells hisproduct to a market with stochastic demand. A groupof suppliers provide essential components withstochastic reliability for the manufacturer. We firstanalyze the manufacturer's optimal ordering quantitydecision. Then we investigate the suppliers' pricecompetition by non-cooperative game theory. In the second part, we model a two echelon assemblysystem which faces deterministic demand affected bythe market price and product quality. In the firststage, the firms decide on investment in the qualityof the components or the final product to stimulatethe market. After the investment, in the secondstage, each firm decides on the wholesale and marketprice. We identify the existence of Nash equilibriumin each stage through potential functions. Moreover, we find that the investment competition with a leadercan always benefit the whole system compared withsimultaneous competition.