Title: Dynamic inventory control game for perishable products with concurrent probabilistic demands from two-fare classes

Authors: Jingpu Song; Liping Liang

Addresses: International Business School, Shanghai University of International Business and Economics, Wenxiang Road 1900, Songjiang, Shanghai, 201620, China ' Department of Computing and Decision Sciences, Lingnan University, 8 Castle Peak Road, Tuen Mun, N.T., Hong Kong

Abstract: With the existence of uncertain demands and competitors, a seller's inventory control policy for perishable products can significantly affect the seller and consumers due to its effects on the seller's revenue, transferred demand, and product availability. In this paper, we consider two sellers selling substitutable products in a market where the ordering requests from different fare classes arrive concurrently. We formulate this problem as a two-player two-fare-class dynamic inventory control game, and examine the optimal accept/reject policies in both non-cooperative and cooperative situations. Our results shed light on three issues: the impact of transferred demand on a seller's revenue, the structure of the optimal inventory control policy, and the importance of cooperation for sellers in the presence of transferred demand.

Keywords: game theory; inventory control; perishable products; Nash equilibrium; cooperation; probabilistic demands; substitutable products; transferred demand; seller revenue; optimal control.

DOI: 10.1504/IJIR.2013.058342

International Journal of Inventory Research, 2013 Vol.2 No.1/2, pp.82 - 107

Published online: 25 Jul 2014 *

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