Decentralized Decision-making and Protocol Design for Recycled Material Flows

I-Hsuan Hong (ihongmail.nctu.edu.tw)
Jane Ammons (jammonsisye.gatech.edu)
Matthew Realff (Matthew.Realffchbe.gatech.edu)

Abstract: Reverse logistics networks often consist of several tiers with independent members competing at each tier. This paper develops a methodology to examine the individual entity behavior in reverse production systems where every entity acts to maximize its own benefits. We consider two tiers in the network, collectors and processors. The collectors determine individual flow functions that relate the flow they provide each processor to the overall vector of prices that the processors determine. Because the exact final prices are unknown, each collector solves a robust optimization formulation where the prices paid by the processors are assumed to be within given ranges. The processors compete for the flow from the collectors until the Nash equilibrium is reached in this competitive tier, which sets the vector of prices to be offered to the collectors. To demonstrate the approach, a numerical example is given for a prototypical recycling network.

Keywords: decentralized decision-making; reverse production systems; the Nash Equilibrium

Category 1: Applications -- OR and Management Sciences (Production and Logistics )

Category 2: Other Topics (Game Theory )

Category 3: Robust Optimization

Citation: Working paper, Industrial Engineering & Management, National Chiao Tung University, Taiwan, 11/2006

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Entry Submitted: 11/14/2006
Entry Accepted: 11/14/2006
Entry Last Modified: 11/14/2006

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