Modelling and analysis of a network organization for cooperation of manufacturers on production capacity
We present an analytical model to analyze the operation of a productive cooperation network where producers cooperate on production capacity. Producers have limited capacity and have access to subcontractors at a higher cost. A single-unit auction-based allocation mechanism is proposed to allocate...
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| Format: | Article |
| Language: | English |
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Hindawi Limited
2006-01-01
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| Series: | Mathematical Problems in Engineering |
| Online Access: | http://dx.doi.org/10.1155/MPE/2006/85103 |
| Summary: | We present an analytical model to analyze the operation of a
productive cooperation network where producers cooperate on
production capacity. Producers have limited capacity and have
access to subcontractors at a higher cost. A single-unit
auction-based allocation mechanism is proposed to allocate an
arriving order based on the producers' cost structures and their
current loads to maximize the total profit. We show that when the
costs are private information, producers are willing to cooperate
in order to increase their expected profit. Furthermore, it is
shown that there is an equilibrium where producers bid their
actual costs. The cooperation can also generate extra profit to
cover a part of its operating expenses with this allocation
mechanism. A continuous-time Markov chain model is utilized to
evaluate the performance of the allocation mechanism where
producers submit their myopic best response bids. The cooperation
case is also compared with the no-cooperation case and also with
the centralized operation of producers. |
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| ISSN: | 1024-123X 1563-5147 |