Supply Chain With Inventory Review and Dependent Demand Distributions: Dynamic Inventory Outsourcing

In this paper, we consider inventory outsourcing by a producer to a distributor. The distributor charges a cost for each unit it handles and the manufacturer responds with a production and inventory policy over a finite contract period. As a result, the two parties enter a noncooperative differential game. We address the effect of information asymmetry in such a game under a stochastic demand when the inventory level can only be observed by the manufacturer intermittently.