An Evolutionary Game Theory Approach to Modeling VMI Policies

The strategy of integration known as VMI (Vendor-Managed Inventory) allows the coordination of inventory policies between producers and buyers in supply chains. Based on a new proposed model for the implementation of VMI in a chain of two links composed of a producer and a buyer, this paper studies the evolution of individual strategies of the producer and the buyer by a formalism derived from the theory of evolutionary games. The conditions that determine the stability of evolutionarily stable strategies are derived and analyzed. Work results specify analytical conditions that favor the implementation of VMI on traditional chains without VMI.