Studies on horizontal competition among homogenous retailers through agent-based simulation

Abstract

This paper adopts agent-based simulation to study the horizontal competition among homogenous price-setting retailers in a one-to-many supply chain (a supply chain consists of one supplier and multiple retailers). We model the supplier and retailers as agents, and design their behavioral rules respectively. The results show that although the agents learn individually based on their own experiences, the system converges asymptotically to near Nash equilibrium steady states. When analyzing the results, we first discuss the properties of these steady states. Then based on these properties, we analyze the effects of the retailers’ horizontal competition on the retail prices, retailers’ profits and supplier’s revenue.

Keywords

Supply chain / horizontal competition / agent-based simulation / Nash equilibrium

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