Analysis of a two-stage telecommunication supply chain with technology dependent demand

We analyze a two-stage telecommunication supply chain consisting of one operator and one vendor under a multiple period setting. The operator faces a stochastic market demand which depends on technology investment level. The decision variables for the operator are the initial technology investment l...

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Bibliographic Details
Published in:European journal of operational research 2007-03, Vol.177 (2), p.995-1012
Main Authors: CANAKOGLU, Ethem, BILGIC, Taner
Format: Article
Language:English
Subjects:
Algorithms
Analysis
Applied sciences
Contract design
Exact sciences and technology
Firm modelling
Logistics
Multiple period revenue sharing
Nash equilibrium
Operational research and scientific management
Operational research. Management science
Stochastic models
Supply chain management
Supply chains
Telecommunications
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Summary:We analyze a two-stage telecommunication supply chain consisting of one operator and one vendor under a multiple period setting. The operator faces a stochastic market demand which depends on technology investment level. The decision variables for the operator are the initial technology investment level and the capacity of the network for each period. The capacity that the operator installs in one period also remains available in subsequent periods. The operator can increase or decrease the available capacity at each period. For this model, an algorithm to find the centralized optimal solution is proposed. A profit sharing contract where firms share both the revenue and operating costs generated throughout the periods along with initial technology investment is suggested. Also a coordinating quantity discount contract where the discount on the price depends on the total installed capacity is designed. The case where the vendor decides on the technology investment level and the operator decides on the capacity of the network is also analyzed and it is shown that this game has a unique Nash equilibrium.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2006.01.006