Decisions, Operations, and Technology Management

We consider a competitive version of the traditional aggregate production planning model with capacity constraints. In the general case, multiple products are produced by a group of competing producers with limited capacities. Production quantities, prices and consequently profits depend on production and allocation decisions of each producer. In addition, there is competition for the raw material whose supplies are limited, and where prices reflect these limitations. Such situations have recently occurred in several process industry settings including the petro-refining and metal processing sectors, such as steel and copper. We use a successive “Bertrand-Cournot” framework to address this problem and to determine optimal production quantities, prices and profits at the producers and at the raw material supplier.