Cooperation and profit allocation in distribution chains

L.A. Guardiola, A. Meca, Judith B. Timmer

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Abstract

We study the coordination of actions and the allocation of profit in distribution chains under decentralized control. We consider distribution chains in which a single supplier supplies goods for replenishment of stocks of several retailers who, in turn, sell these goods to their own separate markets. The goal of the supplier and the retailers is to maximize their individual profits. Since the optimal joint profit under centralized control is larger than the sum of the individual optimal profits under decentralized control, cooperation among firms by means of coordination of actions may improve individual profits. The effects of cooperation are studied by means of cooperative games. For each distribution chain we define a corresponding cooperative game and study its properties. Among others we show that such games are balanced. Based on the nice core structure a stable solution concept for these games is proposed and its properties are interpreted in terms of the underlying distribution chain.
Original languageUndefined
Place of PublicationEnschede
PublisherUniversity of Twente, Department of Applied Mathematics
ISBN (Print)0169-2690
Publication statusPublished - 2005

Publication series

Namememorandum
PublisherDepartment of Applied Mathematics, University of Twente
No.1770
ISSN (Print)0169-2690

Keywords

  • MSC-90B99
  • MSC-91A12
  • EWI-3590
  • Balancedness
  • IR-65954
  • Distribution chain
  • mgpc-solution
  • METIS-224400
  • Cooperative game

Cite this

Guardiola, L. A., Meca, A., & Timmer, J. B. (2005). Cooperation and profit allocation in distribution chains. (memorandum; No. 1770). Enschede: University of Twente, Department of Applied Mathematics.