Determining Decision Variables for Manufacturer and Retailer in the Co-operative and Non-cooperative Environment: A Game Theory Approach

Abstract

Several inventory models were proposed for manufacturer and retailer which included competition and cooperation between manufacturer and retailer to maximize their profits. Esmaeili M et al. (2009) developed the relationship between manufacturer and Retailer for non co-operative and cooperative games. But the model did not involve any shortage cost as no shortage was allowed. In this paper researcher consider market demand is affected by marketing expenditure and price charged by retailer. This research, presented in this paper, allows shortages for the infinite planning horizon and investigates 1.The non co-operative game for manufacturer-Stackelberg model allowing shortage when manufacturer is the leader and would like to maximize his profit.2.retailer-stackelberg model when retailer is the leader and would like to maximize his profit.3.The co-operative game approach to obtain Pareto Efficient solution. Model is verified through some numerical examples.

Keywords

• manufacturer-retailer
• co-operative and non-co-operative games
• game theory
• marketing expenditure
• shortage