A Stackelberg Game Approach in an Integrated Inventory Model with Carbon-Emission and Setup Cost Reduction

Abstract

This paper formulates an integrated inventory model that allows Stackelberg game policy for optimizing joint total cost of a vendor and buyer system. After receiving the lot, the buyer commences an inspection process to determine the defective items. All defective items the buyer sends to vendor during the receiving of the next lot. Due to increasing number of shipments fixed and variable transportation, as well as carbon emissions, are considered, which makes the model sustainable integrated model forever. To reduce the setup cost for the vendor, a discrete setup reduction is considered for maximization more profit. The players of the integrated model are with unequal power (as leader and follower) and the Stackelberg game strategy is utilized to solve this model for obtaining global optimum solution over the finite planning horizon. An illustrative numerical example is given to understand this model clearly.