A Stochastic Programming Duality Approach to Inventory Centralization Games

36 Pages Posted: 3 Nov 2008

See all articles by Xin Chen

Xin Chen

New York University (NYU)

Jiawei Zhang

affiliation not provided to SSRN

Date Written: September 2007

Abstract

In this paper, we present a unified approach to study a class of cooperative games arisingfrom inventory centralization. The optimization problems corresponding to the inventory games are formulated as stochastic programs. We observe that the strong duality of stochastic linear programming not only directly leads to a series of recent results concerning the non-emptiness of the cores of such games, but also suggests a way to find an element in the core. The proposed approach is also applied to inventory games with concave ordering cost. In particular, we showthat the newsvendor game with concave ordering cost has a non-empty core. Finally, we prove that it is NP-hard to determine whether a given allocation is in the core for the inventory games even in a very simple setting.

Keywords: Stochastic Programming, Inventory Centralization, Cooperative Game

Suggested Citation

Chen, Xin and Zhang, Jiawei, A Stochastic Programming Duality Approach to Inventory Centralization Games (September 2007). Operations Management Working Papers Series, Vol. , pp. -, 2007. Available at SSRN: https://ssrn.com/abstract=1293132

Xin Chen

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Jiawei Zhang

affiliation not provided to SSRN

No Address Available

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