Many companies producing durable products, profit more from spares than the base parts. In a competitive and uncertain aftermarket, an Original Equipment Manufacturer (OEM) can benefit from Game Theory to manage spare parts inventories. We study the spare parts inventory game as an N-person non-zero-sum single-shot game where players play simultaneously. The game is restricted to a two-player (the OEM and the market) non-cooperative game setup. The market is an unreasoning entity whose strategic choices affect the payoff of the OEM, with no interest in the outcome of the game. This is a game against nature, which means the OEM plays against the market. The OEM decides on a pricing strategy (in a competitive manner with low cost manufacturers or will-fitters to absorb more customers) and the order-up-to stock level, and its inventory level strategy is not dominated – i.e. the game has a mixed strategy solution. This solution maximizes the payoff for the OEM by setting the price and the inventory level based on assumptions on the lower and upper bounds of the demand’s distribution parameters.
| Published in | International Journal of Business and Economics Research (Volume 3, Issue 6) |
| DOI | 10.11648/j.ijber.20140306.12 |
| Page(s) | 211-219 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2014. Published by Science Publishing Group |
Spare Parts Management, Spare Parts Pricing, Game against Nature, Stochastic Demand
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APA Style
Masoud Vaziri, Manbir Sodhi. (2014). Application of Game Theory on Inventory Level Decision Making. International Journal of Business and Economics Research, 3(6), 211-219. https://doi.org/10.11648/j.ijber.20140306.12
ACS Style
Masoud Vaziri; Manbir Sodhi. Application of Game Theory on Inventory Level Decision Making. Int. J. Bus. Econ. Res. 2014, 3(6), 211-219. doi: 10.11648/j.ijber.20140306.12
AMA Style
Masoud Vaziri, Manbir Sodhi. Application of Game Theory on Inventory Level Decision Making. Int J Bus Econ Res. 2014;3(6):211-219. doi: 10.11648/j.ijber.20140306.12
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Download@article{10.11648/j.ijber.20140306.12,
author = {Masoud Vaziri and Manbir Sodhi},
title = {Application of Game Theory on Inventory Level Decision Making},
journal = {International Journal of Business and Economics Research},
volume = {3},
number = {6},
pages = {211-219},
doi = {10.11648/j.ijber.20140306.12},
url = {https://doi.org/10.11648/j.ijber.20140306.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20140306.12},
abstract = {Many companies producing durable products, profit more from spares than the base parts. In a competitive and uncertain aftermarket, an Original Equipment Manufacturer (OEM) can benefit from Game Theory to manage spare parts inventories. We study the spare parts inventory game as an N-person non-zero-sum single-shot game where players play simultaneously. The game is restricted to a two-player (the OEM and the market) non-cooperative game setup. The market is an unreasoning entity whose strategic choices affect the payoff of the OEM, with no interest in the outcome of the game. This is a game against nature, which means the OEM plays against the market. The OEM decides on a pricing strategy (in a competitive manner with low cost manufacturers or will-fitters to absorb more customers) and the order-up-to stock level, and its inventory level strategy is not dominated – i.e. the game has a mixed strategy solution. This solution maximizes the payoff for the OEM by setting the price and the inventory level based on assumptions on the lower and upper bounds of the demand’s distribution parameters.},
year = {2014}
}
TY - JOUR T1 - Application of Game Theory on Inventory Level Decision Making AU - Masoud Vaziri AU - Manbir Sodhi Y1 - 2014/11/25 PY - 2014 N1 - https://doi.org/10.11648/j.ijber.20140306.12 DO - 10.11648/j.ijber.20140306.12 T2 - International Journal of Business and Economics Research JF - International Journal of Business and Economics Research JO - International Journal of Business and Economics Research SP - 211 EP - 219 PB - Science Publishing Group SN - 2328-756X UR - https://doi.org/10.11648/j.ijber.20140306.12 AB - Many companies producing durable products, profit more from spares than the base parts. In a competitive and uncertain aftermarket, an Original Equipment Manufacturer (OEM) can benefit from Game Theory to manage spare parts inventories. We study the spare parts inventory game as an N-person non-zero-sum single-shot game where players play simultaneously. The game is restricted to a two-player (the OEM and the market) non-cooperative game setup. The market is an unreasoning entity whose strategic choices affect the payoff of the OEM, with no interest in the outcome of the game. This is a game against nature, which means the OEM plays against the market. The OEM decides on a pricing strategy (in a competitive manner with low cost manufacturers or will-fitters to absorb more customers) and the order-up-to stock level, and its inventory level strategy is not dominated – i.e. the game has a mixed strategy solution. This solution maximizes the payoff for the OEM by setting the price and the inventory level based on assumptions on the lower and upper bounds of the demand’s distribution parameters. VL - 3 IS - 6 ER -
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