Note: Evaluating a negotiation–production system through Markov chains

Abstract

The note describes a method for modelling a negotiation–production manufacturing system, which is an abstraction of the behaviour of make-to-order companies participating in business-to-business (B2B) trading networks. The model may be used in order to evaluate both the profitability of their overall negotiation practice and that of specific incoming orders. The negotiation–production system is modelled using continuous-time Markov chains (CTMC). Long-run analysis of the Markov chain is used to evaluate overall negotiation practice, while transient analysis is used to evaluate individual orders.

Keywords:

• production plans
• negotiation
• Markov chains
• economic evaluation

Tommaso Calosso graduated as an Industrial Engineer at the Politecnico di Torino, Italy, where he worked as Research Assistant in automated negotiations and production planning. He is currently pursuing a MSc in Economics at the London School of Economics, UK. His research interests are in software and Internet-related economics, engineering and competition policy.

Marco Cantamessa is an Associate Professor at the IV Faculty of Engineering of the Politecnico di Torino, where he teaches courses in ‘Management of Innovation and Product Development’ and ‘Production Planning and Control’. His research interests cover the field of operations management, concerning both manufacturing and product development. He has authored or co-authored more than sixty scientific papers, of which fifteen appeared in international refereed journals. He currently serves on the Management Board of The Design Society, an international learned organization, and has served on the Scientific Boards of a number of international conferences.