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Game Theory in Transport and Logistics

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Game Theory in Transport and Logistics

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Game Theory in Transport and Logistic; An Empirical Case

Article · May 2015

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Sajjad Khaksari
Politecnico di Torino
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Prof. Luigi Buzzacchi, Politecnico di Torino
Student: Sajjad Khaksari
May 9, 2015
!
OV & DP and BRT
Game Theory
A briefly attempt
!
Is it possible to modeling one of the reality of Transport&Logistic World, thanks to the
famous Game Theory? The main idea to write this paper began with this question.
!
So, let start with description of the game. We have OV (Officine Vica) as client. In
addition DP and BRT are Transport&Logistic supplier for OV. Means that when OV
needs a service for transporting her products, asks one of these guys. However there are
some conditions could effect on the decision of OV to call which of her suppliers:

BRT BRT
BRT is faster (express) and more organized DP is not so fast and organize

BRT wants her fee max. 90 days DP wants her fee max. 120 days

!
! IVECO
!
!
!
!
!
!
!
!
!
! OV

BRT dp
As we can imagine the essential elements in this Game are the following:

a. Actors: OV, DP and BRT are actors of this game.


!
b. Decisions: The players could choose different decisions. Means different
Strategy (Si) to play the Game. For example OV normally prefer to choose DP
rather than BRT, because she could pay the fixed fee after 120 days. In another
hands, sometime is better to choose BRT, because they are faster.
!
c. The Information: Actors in this game, have perfect information about their
Payoff and the strategy of other players but they have almost perfect information
(not 100% perfect information) about the payoff of other players.
!
d. The Rules: Actors are aware about the rules. They are not particular rules in
world of transport. OV should Load the vehicle of BRT or DP in the standard
and safe method, then she must give all DDT (Transport Document) to the agent.
Ones the product has loaded, supplier’s agent should sign the DDT and transport
the product to the destination and after unloading the product into Delivery Point,
agent has to bring back the signed DDT.
!
e. The Utility function: Players will receive their Utility base on their desire. OV
wants supplier transport her products safety, on-time with lower cost. Suppliers
(DP and BRT) want less GWT (Global Waiting Time) and more efficiency to
receive more pure financial utility.
!
!
!
So, which kind of game is it? Is it static game or it is dynamic? How many game they are?
OV find herself in front of two players (DP or BRT). So she could play with both.
!
Then we have a game between suppliers [the competitors (DP and BRT)]. So, total number
of games, might be 3 games.
!!
I. One game between DP and BRT
II. Two games between OV and her suppliers
!!
!
I. One game between DP and BRT
The game between two suppliers (DP and BRT), could be similar to the game of “Battle of
Sex”? I guess, yes! So if I am not rung, this game is STATIC GAME OF PERFECT
INFORMATION. So, let assume some payoff for each players in the game of competitors
(The game between DP and BRT):
! DP

BRT do not enter in the game when it is fee


90 120
after 120 days, so her Payoff is equal to 0.
However DP prefer 90 days rather than 120, so 90 3,4 3,3
her Payoff is 4 rather than 3. BRT

! 120 0,3 0,3

!
II. Two games between OV and her suppliers
OV find herself in front of two players (DP and BRT). So she could play with both. As we
describe above, she prefer normally DP but sometime, in some case she doesn't want to
risk and prefer to use the BRT services. This game looks like more similar to the
DYNAMIC GAME and information are almost COMPLETE&PERFECT INFORMATION.
!
Why it is dynamic and complete information? Might because in the first time period,
singleton OV play her game and chooses to pay the fixed fee of supplier in the day of
service or after 90 days (in the case of BRT) or after 120 days (in the case of DP).
!
Then in the second time player 2 (DP or BRT) observes the action of first player and with
knowledge about the strategy OV has decided, will play her part. Payoffs are U1 ( a1, a2)
and U2 ( a1, a2).
!
! 4,3 5,3
! 90 120

! BRT DP

! 90 0 0,5 120 0 0,5

! OV OV
!
! 0 90 4,3 0 120 5,3
! BRT DP

! 0 0,5 0 0,5
!
OV plays the dynamic game with BRT OV plays the dynamic game with DP
So, as we see in the above diagrams, OV wants to reach her maximum payoff (5). It
means that paying the fixed fee of the Transport Service, not on the day of service, but
after a long time. Might for this reason OV normally prefer DP rather than BRT.
!
When OV play 120 and DP also play 120, that is the Perfect Nash Equilibrium in the
mind of OV. For OV playing 0 (pay today) is not perfect strategy but for her opponents
(DP and BRT) its a perfect strategy. OV never go to play this strategy, except a grim case!
So maybe we can say that the game has just 1 NE for each of players.
!
!
! 4,3
! 90 120 5,3

! BRT DP
! 90 0 0,5 120 0 0,5

! OV OV
!
! 0 90 4,3 0 120 5,3
! BRT DP

! 0 0,5 0 0,5
!
!
!
Before conclude the case, its important to tack account about the global atmosphere of
the market. Transport & Logistics companies, they have created some natural and
strategical Entry Barriers. Some of these barriers are depend to the needs of investing
a huge amount of money to purchase tangible and intangible assets, such as lands,
magazine, parking space, software and hardware logistic devices plus truck and vehicles.
!
However, there is even other impenetrable barriers, that invented by the regulator. In this
case the regulator is Ministero delle Infrastrutture e dei Trasporti. The rules from the
ministry and the standards, they ask, are adversity enough to avoid any new entrance!
!
These barriers gave to the market, the multi-poly structure. This presented
infrastructure, forced some of the companies to compete with others positively, but in the
another hand, some others, abuse from the monopoly situation. Furthermore, in the such
atmosphere, the probability of Collusion is high.
!
Resources: To write this paper we use books and websites has addressed in below.

✓ Jeffrey R. Church and Roger Ware. Industrial Organization: A Strategic Approach. New York:
McGraw-Hill, 2000.
!
✓ Robert Gibbons. A Primer in Game Theory: Harvester Wheatsheaf, 1992.
!
✓ Lecture notes of Prof. Luigi Buzzacchi
!
✓ A. Villa, De Toni, Palazzolo; Gestione della produzione, Isedi, 2013
!
✓ DHL web site
!
✓ Trasporto merci su strada, è una pubblicazione a cura di: ANFIA - Associazione Nazionale
Filiera Industria Automobilistica – Area Studi e Statistiche Automobile Club d’Italia –
Area Professionale Statistica
!
✓ Ministero delle Infrastrutture e dei Trasporti, DIPARTIMENTO PER I TRASPORTI, LA
NAVIGAZIONE ED I SISTEMI INFORMATIVI E STATISTICI, DIREZIONE GENERALE PER I
SISTEMI INFORMATIVI, STATISTICI E LA COMUNICAZIONE; UFFICIO DI STATISTICA,
SISTEMA STATISTICO NAZIONALE; Conto Nazionale delle Infrastrutture e dei Trasporti
!
✓ Analisi e previsioni per il trasporto merci in Italia, © Confcommercio-Imprese per l’Italia
!
✓ Logistics and supply chain management: creating value-adding networks / Martin
Christopher. -- 4th ed. PEARSON EDUCATION LIMITED
!
✓ O'Brien, Marakas; Introduction to information system; 16th edition
!
✓ Prof. Alessandro Perego; Politecnico di Milano
!
✓ Personal Transport and Logistic blog of Sajjad Khaksari: http://italiancoaddress.blogspot.it

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