ABSTRACT:
We consider a decentralized supply chain formation problem for linear, multi-echelon supply chains when the managers of the individual echelons are autonomous, rational, and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance.  The problem can be
broken up into two sub-problems following a mechanism design approach: (1) Design of an incentive compatible mechanism to elicit the true cost functions from the echelon managers; (2) Formulation and solution of an appropriate optimization problem using the true cost information.

In this talk, we first propose a dominant strategy incentive compatible (DSIC) protocol based on the classical Vickrey-Clarke-Groves mechanisms, for solving this problem. This solution makes it a best response for each agent to report true cost functions irrespective of what is reported by the other agents. Next, we propose a novel Bayesian incentive compatible (BIC) mechanism for eliciting the true cost functions.  The BIC protocol makes truth revelation a best response for each agent only when all other agents also report their true cost functions. The BIC protocol significantly reduces the cost of supply chain formation.

We illustrate the two protocols through the example of a three echelon manufacturing supply chain.

BIOGRAPHY OF Y. NARAHARI
Y. Narahari is currently a Professor at the Department of Computer Science and Automation, Indian Institute of Science, Bangalore. He completed his Ph.D. at the same Department in 1988, with his Doctoral Dissertation on Petri Nets winning the Best Thesis Award for Electrical Sciences at the Indian Institute of Science. His current research focuses on the use of game theory and  mechanism design in network economics problems. He is currently completing a research monograph entitled Emerging Game Theoretic Problems in Network Economics and Mechanism Design Solutions, to be published by Springer, London. He has earlier co-authored a widely acclaimed textbook on Performance Modeling of Automated Manufacturing Systems (Prentice Hall, Englewood Cliffs, NJ, 1992). He has spent sabbaticals at the Massachusetts Institute of Technology, Cambridge, MASS, USA, in 1992 and at the National Institute of Standards and Technology, Gaithersburg, MD, USA, in 1997.  He  is currently on the editorial board of IEEE Transactions on Systems, Man & Cybernetics (Part A) and IEEE Transactions on Automation Science & Engineering. Dr. Narahari is a Fellow of the Indian National Academy of Engineering and a Homi Bhabha Fellow.  He has been involved in several collaborative research projects with Intel, General Motors R&D, and Infosys in the areas of supply chain formation, procurement auctions, combinatorial auctions, and optimal mechanisms.

For more information on Dr.Narahari please visit his personal webpage