Cooperation between Multiple Newsvendors with Warehouses

Abstract

This study considers a supply chain that consists of n retailers, each of them facing a newsvendor problem, m warehouses and a supplier. The retailers are supplied with a single product via some warehouses. In these warehouses, the ordered amounts of goods of these retailers become available after some lead time. At the time that the goods arrive at the warehouses, demand realizations are known by the retailers. The retailers can increase their expected joint profits by coordinating their orders and making allocations after demand realization. For this setting, we consider an associated cooperative game between the retailers. We show that this associated cooperative game has a nonempty core. Finally, we study a variant of this game, where the retailers are allowed to leave unsold goods at the warehouses.

Keywords: Supply chain management, newsvendor, warehouse, game theory, balancedness