Optimal co-investment in supply chain infrastructure

Konstantin Kogan, Charles S. Tapiero

Research output: Contribution to journalArticlepeer-review

Abstract

This paper considers co-investment in a supply chain infrastructure using an inter-temporal model. We assume that firms' capital is essentially the supply chain's infrastructure. As a result, firms' policies consist in selecting an optimal level of employment as well as the level of co-investment in the supply chain infrastructure. Several applications and examples are presented and open-loop, as well as feedback solutions are found for non-cooperating firms, long- and short-run investment cooperation and non-simultaneous moves (Stackelberg) firms. In particular, we show that a solution based on Nash and Stackelberg differential games provides the same level of capital investment. Thus, selecting the leader and the follower in a co-investment program does not matter. We show that in general, co-investments by firms vary both over time and across firms, and thereby render difficult the implementation of co-investment programs for future capital development. To overcome this problem, we derive conditions for firms' investment share to remain unchanged over time and thus be easily planned.

Original languageEnglish (US)
Pages (from-to)265-276
Number of pages12
JournalEuropean Journal of Operational Research
Volume192
Issue number1
DOIs
StatePublished - Jan 1 2009

Keywords

  • Control
  • Gaming
  • Investment analysis
  • Supply chain management

ASJC Scopus subject areas

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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