Competitive and cooperative policies for the vendor–buyer system

Abstract

This paper considers a model for decentralized dynamic production–distribution control. We examine the situation where a vendor produces a product in a batch production environment and supplies it to a buyer under deterministic conditions. Some conditional games for the vendor and the buyer are defined. The games are indexed by numbers of shipments acceptable to both players before the strategies competition begins. A construction of Nash equilibrium strategies is given in the proof of the existence theorem. Goyal's numerical example is used to compare our equilibrium solutions with relatively optimal policies in the cooperative case.