A game theoretic model for coordination of single manufacturer and multiple suppliers with quality variations under uncertain demands

In this paper, a game theoretic model for supply chain coordination problem is studied. The supply chain coordination problem involves one manufacturer and multi-suppliers with quality variations under demand uncertainty. The number of defective parts purchased from suppliers is unknown to the manufacturer while each supplier can determine the standard deviation of defective items. The relationship between the manufacturer and the suppliers is modelled by a non-cooperative game. The non-cooperative game model is analysed by the Stackelberg equilibrium where the manufacturer is regarded as a leader and the suppliers as followers. By deriving suppliers’ best response functions, the Stackelberg equilibrium under uncertainties is established. Sensitivity analysis is conducted to investigate the features of the proposed models with cost parameters. The results validate the derived managerial insights derived for the proposed model.