An Analysis of Optimal Capacity under Three Different Scenarios

Consider two independent supply chains, each consists of a manufacturer and a retailer. The distribution of demand in one supply chain is determined and known by both manufacturers. The distribution of demand in the other supply chain changes with time. We consider 3 different scenarios. In the first scenario, the two manufacturers do not cooperate. They assemble their products exclusively. In the second scenario, the two manufacturers cooperate partly, which means that they must make capacity decisions independently. But they can share their excess capacities. In the last scenario, the two manufacturers cooperate completely. They can exchange their information before installing their capacities and share their excess capacities after demands are observed. We specify the optimal capacities for both manufacturers and analyze factors affecting them in those scenarios mentioned above