2006 journal article
Capacity allocation with traditional and Internet channels
NAVAL RESEARCH LOGISTICS, 53(8), 772–787.
author keywords: capacity allocation; game theory; nash equilibrium; sequential game
TL;DR:
A myopic solution is derived and shown to be a Nash equilibrium solution of a corresponding “sequential game” in which each firm decides its total capacity and allocates this capacity between its local and online stores.
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UN Sustainable Development Goal Categories
12. Responsible Consumption and Production
(Web of Science)
Source: Web Of Science
Added: August 6, 2018
AbstractIn this paper we study a capacity allocation problem for two firms, each of which has a local store and an online store. Customers may shift among the stores upon encountering a stockout. One question facing each firm is how to allocate its finite capacity (i.e., inventory) between its local and online stores. One firm's allocation affects the decision of the rival, thereby creating a strategic interaction. We consider two scenarios of a single‐product single‐period model and derive corresponding existence and stability conditions for a Nash equilibrium. We then conduct sensitivity analysis of the equilibrium solution with respect to price and cost parameters. We also prove the existence of a Nash equilibrium for a generalized model in which each firm has multiple local stores and a single online store. Finally, we extend the results to a multi‐period model in which each firm decides its total capacity and allocates this capacity between its local and online stores. A myopic solution is derived and shown to be a Nash equilibrium solution of a corresponding “sequential game.” © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2006