Scenario-based price negotiations vs. game theory in the optimization of coordinated supply chains

Abstract

A scenario-based negotiation (SBN) win-to-win approach is proposed for the optimization of coordinated decentralized multi-site multi-product Supply Chains (SCs) in a competitive environment. Based on non-symmetric roles, the leader aims to settle its offer taking into account the uncertain reaction of the follower, which behavior is represented by a probability of acceptance. Different negotiation scenarios, based on considering Standalone, Cooperative, and Non-Cooperative SCs are analyzed for the negotiation, resulting in different MINLP tactical models, which are illustrated using a case study with different “follower” SCs around an industrial production SC “leader”. On the other hand, a Stackelberg non-cooperative bi-level MINLP game model is built and solved for the same case study. The Non-Cooperative Negotiation Scenario (NCNS) proves to be more adequate, leading to higher individual profits expectations.