Abstract for: Dynamic Supply Chains with Endogenous Allocation
The movement of goods through a supply chain depends not only on the physical flow of goods but often also on the economic decisions of each entity along the chain, including price discovery and inventory disposition decisions. This paper presents a supply chain model featuring economic decision processes by combining three classic modeling methods: co-flow differential equation structures, spot price discovery, and multinomial logistic choice modeling. To illustrate this method, a realistic example of a bifurcated food supply chain is explored which follows the production and disposition of food from an original producer, through a value-add supply chain, into two separate customer types. When exposed to shocks in demand patterns like those seen during the COVID-19 pandemic, this model helps illuminate the structural features that can lead to seemingly contradictory outcomes, such as a surge in hunger rates simultaneously with a surge in purposeful food destruction along the supply chain.