DGA Seminar: Mahnaz Fakhrabadi

Mahnaz Fakhrabadi
Norwegian School of Economics

Dynamic Games and Applications Seminar

Impacts of Different Contracts and Policy Constraints in a Distributional Robust Approach

February 8, 2024 11:00 AM — 12:00 PM (Montreal time)

Zoom webinar link

This research tackles decentralized supply channels and proposes comprehensive solution algorithms for multi-periodic bilevel equilibrium problems. The supply channel consists of two members, an upstream member (manufacturer) and a downstream member (retailer), who assume the roles of leader and follower, respectively, in a Stackelberg game. The primary objective of the channel is to effectively manage dynamic demand, which is dependent on price history, within a multi-period time frame. Due to the price history effect on the uncertain demand, the problem turns out to be highly nested. We present a channel facing dynamic and price-dependent demand, where the demand information is incomplete, and the only information provided is the mean and the standard deviation of the demand. To address this challenge, a distributional-robust (DR) approach is proposed, which provides a lower bound on the channel’s expected profit for the problem with known distribution. We consider both periodic contracts (a subgame perfect solution) and single contract (covering all periods simultaneously). The leader’s expected payoff of a single contract, logically, is not lower than the subgame perfect result. For the follower on the other hand, we did not observe any counterexample to demonstrate that he may be worse off by using a single contract. The algorithm optimally addresses concerns related to corrective actions. It incorporates pollution capacity constraints, pollution tax, and a cap-and-trade system. Moreover, a buyback contract influence, to share the risk of leftovers optimally, is evaluated. (joint work with Leif Kristoffer Sandal)