Game theory-based two–echelon logistic models for competitive behaviors

Abstract

This paper considers the optimal solutions under cooperative circumstance of the two-echelon model among logistic service providers (LSPs) with Stackelberg structure. Assuming duopolistic shippers and oligopolistic forwarders are the shippers are perform as a leader and declare their service to both forwarders to set price and quantity independently under shipper’s scheme. The objective of this paper is to analyze the optimal solutions of the three rival game behaviors: Stackelberg, Collusion and Cournot— on the optimal decisions for the shipper and the oligopolistic forwarders. Thus, the two-echelon profit model is proposed to study the action of the logistics players’ decisions. Numerical examples are exemplified to show the maximum profit decision among three behaviors for each logistic player in four simulated cases. The result of this proposed method would be used as decision supports for LSPs make a pricing decision under their competitive and unclear information situation for optimal benefit. The result indicates that: (i) among three scenarios, the duopolistic forwarders’ action is Stackelberg behavior can carry out the maximum profit. (ii) Collusion game can achieve the maximum profit for Shippers.