GAME THEORETICAL MODELS OF COMPETITION IN TIME-SENSITIVE MARKETS

Abstract

<p>This study focuses mainly on situations of time-based competition. Three problems in this context will be studied in three different parts. In the first part, we will examine the promised delivery time (PDT) competition for firms whose production processes consist of more than one stage. We study three games; a) when each firm consists of two stages and has identical production rates in both stages, b) when each firm consists of k stages and has identical production rate in all stages and, c) when each firm consists of two stages and has different production rates in each stage. In the second part, we focus on a duopolistic market where the firms compete against each other by determining their PDT. The firms try to win the business of a single customer who is sensitive to PDT but will also penalize the winning firm through tardiness costs. This situation may emerge when the production duration is too long and the product is expensive as in the aviation industry. The third part of this study deals with situations of investment competition in the presence of incomplete information in the market. The investment decision will affect the time to production (speed) and determines the probability of winning the business. The notion of incompleteness in information is projected when firms are not fully certain about each other's objective function. In each chapter, we will find the equilibrium of the game and determine the players' optimal strategies. At the end of each chapter, a numerical analysis is presented, where numerous numerical examples are solved. Based on the numerical examples, a sensitivity analysis is also presented for each model that would capture the sensitivity of the Nash equilibria and the firms' optimal strategies towards changes in parameters in the market or the competitor's operations.</p>