Competitive Procurement Under Demand Uncertainty

Stockpilers of commodities in short supply must frequently contend with game-theoretic ramifications arising from the fact that unit purchasing cost increases with aggregate requirements. In this paper, a competitive inventory procurement model for countries facing uncertain demand is analyzed as a game of strategy. Noncooperative and cooperative aspects of the problem are examined. There are significant incentives for cooperating. Some implications of this analysis for strategic petroleum stockpiling models are discussed.