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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.
Automation Science and Engineering, IEEE Transactions on (Volume:7 , Issue: 2 )
Date of Publication: April 2010