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Chinese Journal of Management Science ›› 2015, Vol. 23 ›› Issue (5): 65-72.doi: 10.16381/j.cnki.issn1003-207x.2015.05.009

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Managing Disruption Risk with Inventory Pooling Policy

CHEN Jing-xian1,2, MENG Qing-feng3   

  1. 1. School of Management, University of Science and Technology of China, Hefei 230026, China;
    2. School of Business, Nantong University, Nantong 226019, China;
    3. School of Business Administration, Jiangsu University, Zhenjiang 212013, China
  • Received:2013-03-06 Revised:2014-03-12 Online:2015-05-20 Published:2015-05-20

Abstract: Consider a two-retailer inventory system, a Non-cooperative game model is established to describe inventory pooling policy under disruption risk. It is proved that there exists a unique Nash equilibrium solution to the model. Model analyses show that lateral transshipments always possibly improve retailer's optimal expected profits under demand disruptions. Moreover, comparative static results reflect transshipment price and transshipment cost are two important parameters for optimal order volumes and optimal expected profits. At last, a heuristic algorithm is designed to solving the model's Nash equilibrium.

Key words: disruption management, inventory pooling, Nash equilibrium

CLC Number: