Inventory Sharing and Rationing in decentralized
dealer networks
Presenter: Hui Zhao
zhaoh@ecn.purdue.edu
Co-authors: Jennifer Ryan, Vinayak Deshpande
Purdue University
We analyze an inventory
sharing and rationing problem in a decentralized dealer network, i.e.,
a network in which the dealers are independent of the manufacturer, in
a continuous-review, infinite-horizon setting. The three key features of
our model are: inventory sharing among dealers, multiple demand classes
for each dealer, and decentralized decision making. We first use dynamic
programming to characterize the structure of the optimal inventory sharing
and rationing policy for an individual dealer, taking the other dealers'
decisions as exogenous. We then consider a decentralized, two-dealer setting
to study the impact of inventory sharing and rationing among independent
dealers, considering the interactions between the dealers' decisions. A
game theoretic approach is used to characterize the equilibrium behavior
of the individual dealers. An extensive numerical study highlights the
role of manufacturer incentives and penalties in a decentralized setting.