Competitive models of telecommunication supply chains with effort dependent demand

Abstract

In this study, a model for telecommunication supply chains is developed. A two-stage supply chain consisting of one operator and one vendor is studied in both single period and multi period settings. The operator faces a stochastic market demand with a known cumulative distribution function, which depends on technology investment level. The decision variables for the operator are the capacity of the network and the technology investment level. A three step recipe which consists of finding the centralized solution with a single decision maker overseeing the entire system, then leaving the system decentralized, and fınally designing a contract to make the decentralized solution better and ultimately equal to the centralized solution, is used. For the single period model coordinating revenue sharing and quantity discount contracts are proposed. For the competitive decentralized system, existence of Nash and Stackelberg Equilibria for different scenarios has been shown.In the multi-period model the capacity that the operator installs in one period also remains available in subsequent periods. For the multi-period model, an algorithm to find the optimal solution is suggested. Also a revenue sharing contract where firms share the revenue generated through periods has been suggested. A coordinating quantity discount contract where the discount on the price depends on the total installed capacity rather than the capacity installed (or reduced) in the the relevant period is designed.