Topological rationality of supply chain networks. Issue 10 (18th May 2020)

• Record Type: Journal Article
• Authors: Perera, Supun; Kasthurirathna, Dharshana; Bell, Michael; Bliemer, Michiel
• Is Part Of: International journal of production research. Volume 58:Issue 10(2020)
• Page Start: 3126
• Page End: 3149
• Publication Date: 2020-05-18
• Subjects: supply network -- game theory -- topological rationality -- Prisoner's Dilemma -- network science; Factory management -- Periodicals; 658.57
• DOI: 10.1080/00207543.2019.1630763
• Languages: English
• ISSNs: 0020-7543

Abstract

Abstract : In this study, we apply a topologically distributed bounded rationality model to quantify the level of rationality in supply chain networks. We use the averaged Jensen-Shannon divergence values between Nash and Quantal Response equilibria for all inter-firm strategic interactions, which are represented as Prisoner's Dilemma games, to characterise the average level of rationality in a given supply chain network. This is based on the game theoretic assumption that as the rationality of a particular interaction increases, it converges towards Nash equilibrium, in a certain strategic decision making scenario. Using this model, we demonstrate that hub-and-spoke topologies are collectively more rational compared to scale-free and random network topologies. Finally, we compare our theoretical results against the empirical findings reported for networked systems in various domains. In particular, it is shown that network topologies comprising higher average rationality levels emerge under increasingly competitive environments.