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Loss of coordination in competitive supply chains

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dc.contributor.advisor Georgia Perakis. en_US
dc.contributor.author Teo, Koon Soon en_US
dc.contributor.other Massachusetts Institute of Technology. Computation for Design and Optimization Program. en_US
dc.date.accessioned 2010-04-26T19:19:32Z
dc.date.available 2010-04-26T19:19:32Z
dc.date.copyright 2009 en_US
dc.date.issued 2009 en_US
dc.identifier.uri http://hdl.handle.net/1721.1/54216
dc.description Thesis (S.M.)--Massachusetts Institute of Technology, Computation for Design and Optimization Program, 2009. en_US
dc.description This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. en_US
dc.description Cataloged from student submitted PDF version of thesis. en_US
dc.description Includes bibliographical references (p. 161-163). en_US
dc.description.abstract The loss of coordination in supply chains quantifies the inefficiency (i.e. the loss of total profit) due to the presence of competition in the supply chain. In this thesis, we discuss four models: one model with multiple retailers facing the multinomial logit demand, and three supply chain configurations with one supplier and multiple retailers in a i) quantity competition among retailers with substitute products, ii) price competition among retailers with substitute products, and iii) quantity competition among retailers with complement products, producing differentiated products under an affine demand function. As a special case, we also consider the symmetric setting in the four models where all retailers encounter identical demand, marginal costs, quality dierences, and in the multinomial logit demand case, when there are identical variances in the consumers' utility functions. The main contribution in this thesis lies in the precise quantification of the loss of profit due to lack of coordination, through analytical lower bounds. We provide bounds in terms of the eigenvalues of the demand sensitivity matrix, or the demand sensitivities. For the multinomial logit demand model, the lower bounds are in terms of the number of retailers and the predictability of consumer behaviour. We use simulations to provide further insights on the loss of coordination and tightness of the bounds. We find that a supply chain with retailers operating under Bertrand competition offering substitute products is the most ecient with an average profit loss of less than 15%. We also nd that competitive supply chains can be coordinated when offering substitute products. en_US
dc.description.abstract (cont.) This occurs under the symmetric setting when there is a 'reasonable' number of Cournot retailers under intense competition, or when demand is 'more' inelastic in a Bertrand competition setting. As an example, in the presence of six Cournot retailers under intense competition, the profit loss is 2.04%, and when demand is perfectly inelastic in a Bertrand competition, the supply chain is perfectly coordinated with profit loss of 0%. For the multinomial logit demand case, we nd that higher predictability of consumer behaviour (i.e, when consumers' choices are more deterministic) increases profits both under coordination and under competition, and a larger number of retailers decreases profits under competition, but 3 increases profits under coordination. The net result is that efficiency 'deteriorates' when the number of competitive retailers and predictability of consumer behaviour increases. en_US
dc.description.statementofresponsibility by Koon Soon Teo. en_US
dc.format.extent 163 p. en_US
dc.language.iso eng en_US
dc.publisher Massachusetts Institute of Technology en_US
dc.rights M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. en_US
dc.rights.uri http://dspace.mit.edu/handle/1721.1/7582 en_US
dc.subject Computation for Design and Optimization Program. en_US
dc.title Loss of coordination in competitive supply chains en_US
dc.type Thesis en_US
dc.description.degree S.M. en_US
dc.contributor.department Massachusetts Institute of Technology. Computation for Design and Optimization Program. en_US
dc.identifier.oclc 587544671 en_US


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