Improved and Developed Upper Bound of Price of Anarchy in Two Echelon Case

TL;DR

This paper analyzes the efficiency loss in two-echelon supply chains using the price of anarchy concept, providing tighter bounds and a geometric interpretation based on convex optimization.

Contribution

It introduces a generalized framework for analyzing the price of anarchy in two-echelon supply chains and derives improved upper and lower bounds.

Findings

Tighter upper bounds of price of anarchy are established.

A geometric interpretation of price of anarchy is developed.

The approach is based on convex optimization techniques.

Abstract

Price of anarchy, the performance ratio, which could characterize the loss of efficiency of the distributed supply chain management compared with the integrated supply chain management is discussed by utilizing newsvendor problem in single period which is well-known. In particular, some of remarkable distributed policies are handled, the performance ratios in each case which have been investigated in the previous works are analyzed theoretically and the tighter upper bound of price of anarchy and the lower bound are presented. Furthermore our approach is developed based on a generalized framework and a geometric interpretation of price of anarchy is appeared via the literature of convex optimization.