Competitive Manufacturers’ Quick Response Strategies With Random Yield

Quick response is a strategy of a firm to rapidly respond to the demand uncertainty. With this strategy, firms can postpone operational commitments until more demand information can be obtained due to efficient production. Hence, this strategy can decrease the loss of over production and satisfy customer demand better. However,there is also some disadvantage of the quick response strategy, for example, random yield caused by short lead time. Although random yield and quick response strategy are both extensively-studied in literature, most of them consider them separately. Our main purpose is to investigate the roles of random yield and quick response strategy in competition environment, and to discuss the quick response strategies of competitive manufacturers with random yield.We begin this thesis with a two-stage game model in which two firms with random yield compete in quantity, and then solve the decision problems of the second stage.When firms are homogeneous, we characterize the Nash equilibrium of the first stage,and analyze the impact of random yield and random demand on firms’ decisions and expected profits. Firms tend to adopt the quick response strategy while the demand volatility is high; asymmetric pure Nash equilibrium exists when firms are homogeneous in the presence of random yield. When firms are heterogeneous, we find that the unreliable firm will adopt the quick response strategy while the reliable one will not if both the demand and its volatility are low. At the end of this thesis, we extend the model to the case with multiple homogeneous competing firms, and characterize the Nash equilibrium. In our numerical study, we analyze the effect of the number of firms,random yield rate, volatility of demand and the production cost on the equilibrium.The major contributions of our work are as follows:(1) it takes a lead in the research of random yield and quick response in the presence of competition;(2) We characterize the pure Nash equilibrium. While the firms are homogeneous, we conduct a sensitivity analysis of the equilibrium. When firms are heterogenous, a sensitivity analysis of the equilibrium is also conducted with the assumption of uniform distributed random yield rate;(3) We obtain the pure Nash equilibrium of the game with multiple firms, and numerically conduct a sensitivity analysis of the Nash equilibrium.