Title: Game-theoretic analysis of a two-echelon supply chain with option contract under fairness concerns
Speaker: Prof. Abhishek Sharma, Industrial & Systems Engineering, IIT Kharagpur
Day, Date, and Time: Thursday, August 21, 2023, 10:00 AM to 11:00 AM.
Venue: Seminar room IE 211, Second Floor, IEOR Building.
Abstract: Option contracts are widely used in practice and can be employed to achieve channel coordination. However, limited research work has been reported on option contracts, which considers the influence of decision-makers' behavior on their optimal pricing/ordering strategies and the overall supply chain performance. Hence, in the present study, we investigate the fairness concerns of the channel members in a two-echelon supply chain, composed of single supplier and single retailer, wherein the retailer procures products from the supplier using the option contract. A behavioral model of fairness has been developed by using Nash bargaining solution (NBS) as the fairness reference while formulating the utility functions of the channel members. The supplier-led Stackelberg game framework is adopted and the equilibrium values are derived. The results demonstrate that under certain conditions on the pricing parameters, the supply chain under the channel member's fairness concerns can be coordinated through option contract. However, irrespective of the channel members being fairness-concerned, when the channel is coordinated, the supplier cannot realize its optimal pricing policy. Additionally, the stronger fairness concern of retailer and the mild fairness concern of supplier leads the channel to approach the pricing policy of the coordinated channel. Furthermore, the fairness sensitivity of the retailer/supplier has a positive/negative impact on the overall supply chain performance. The results are demonstrated with the help of a numerical example.
Speaker Bio: Abhishek Sharma is PhD from IIM Rohtak in operations and supply chain management area and B.Tech. graduate in Chemical Engineering from NIT Srinagar. His research interests include behavioural operations management, supply chain coordination and optimization, pricing and ordering policies using newsvendor framework. The outcomes of his thesis work have been published in Computers & Industrial Engineering, Journal of Business and Industrial Marketing, International Game Theory Review. He teaches operations research, supply chain management and analytics, production planning and control, management of inventory systems, business statistics, project management, and related courses. Currently, he is serving as an Assistant Professor in the dept. of Industrial & Systems Engineering, IIT Kharagpur. Previously, he has served as faculty at IMT Business School Dubai, and School of Management & Entrepreneurship, IIT Jodhpur in Operations and Supply Chain Management area. Prior to his PhD, he has worked at Tata Chemicals Ltd. (Fertilizer's division), Babrala as a graduate trainee in ammonia production.