A game theoretical study on lead time, pricing and inventory decisions with price and inventory dependent demand

¹ School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, Iran
² Department of Industrial Engineering, Istinye University, Istanbul, Turkey
³ Department of Industrial Engineering, South Tehran Branch, Islamic Azad University, Tehran, Iran
⁴ Tecnologico de Monterrey, School of Engineering and Sciences, Ave. Eugenio Garza Sada 2501, Monterrey, N. L.64849, México

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Received: 4 December 2024
Accepted: 10 March 2026

Abstract

Nowadays, determining optimal lead time, inventory, and pricing decisions has become a critical challenge in competitive markets, particularly when demand exhibits sensitivity to both price and product availability. This study develops a game-theoretic model in which demand depends jointly on price and inventory levels for complementary products. The analysis considers both single-firm and duopoly settings under alternative competitive regimes, including Nash, Stackelberg, and cooperative strategies. The results show that cooperative behavior yields the highest profits, while pricing and inventory decisions exert stronger impacts on performance than lead-time adjustments. From a managerial perspective, the findings provide guidance on when firms facing complementary demand should compete or cooperate, how coordination can reduce lead times and holding costs, and how sensitivity insights support more effective pricing and inventory decisions.