Technology Selection for Electric Drive Production with a Game Theoretic Approach

Abstract

To solve the supply chain decision problem of technology selection for electric drive production, the authors chose a game theoretic approach to model and solve the bargaining situation of manufacturer (OEM) and supplier. The OEM can decide between a same part strategy and a differentiating strategy with increasing sales potential as well as higher complexity and production costs. The supplier has to choose a production technology and can decide between a specialized technology (e.g. punching) and a flexible technology (e.g. laser). Using the specialized technology the variable costs per piece are lower but every additional variant causes additional tool investments (e.g. punching dies). The interdependence of a supplier’s choice of production technology and its customer’s decision, regarding the number of different product variants that he wishes to source, is modeled as a non-cooperative game in strategic form. The resulting Nash equilibriums in pure and mixed strategies are determined with respect to the investment costs faced by the supplier, the target market conditions and the cost share passed on to the supplier’s customer.