Supply chain games: modeling in a multi-period framework

In this chapter, we extend the single-period newsvendor-type model discussed in Chapter 2 to a multi-period setting. This implies that the supply chain operates in dynamic conditions and that customer demand has a different realization at each period (see, for example, Sethi et al. 2005). In such multi-period cases, the newsvendor problem is turned into a stochastic game. We address here two such games. One is a straightforward extension of the stocking game considered in Chapter 2. The other is a replenishment game, where the decisions are concerned not only with the quantities to order for stock but also with the frequency of orders or, equivalently, with the length of the replenishment period. The meaning of such an extension is not only technical. It is conceptually important for setting the grounds of the management of supply chains in inter-temporal frameworks to be dealt with in forthcoming chapters.