Capacity allocation with competitive retailers

Authors:
Masabumi Furuhata;Dongmo Zhang
Affiliations:
Univesity of Western Sydney, Australia;Univesity of Western Sydney, Australia
Venue:
ICEC '06 Proceedings of the 8th international conference on Electronic commerce: The new e-commerce: innovations for conquering current barriers, obstacles and limitations to conducting successful business on the internet
Year:
2006

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Abstract

This paper addresses a problem in supply chain management that how scarce resources can be efficiently allocated among competing interests. We present a formal model of allocation mechanisms for such settings that a supplier with limited production capacity allocates its products to a set of competitive retailers. In contrary to the existing allocation mechanisms in which retailers are local monopolists, the new model exhibits much more complicated market behaviors. We show that the widely-used proportional allocation mechanism is no longer necessarily Pareto optimal, even if all retailers are in a symmetric situation. A necessary and sufficient condition for the proportional allocation to be Pareto optimal is given. We propose a truth-inducing allocation mechanism based on our capacity allocation model, which is more intuitive and applicable than the existing truth-inducing mechanisms.