Game-Theoretic Analysis of Cooperation Among Supply Chain Agents: Review and Extensions

39 Pages Posted: 12 May 2006

See all articles by Mahesh Nagarajan

Mahesh Nagarajan

University of British Columbia (UBC) - Sauder School of Business

Greys Sosic

University of Southern California - Marshall School of Business

Abstract

This paper surveys some applications of cooperative game theory to supply chain management. Special emphasis is placed on two important aspects of cooperative games: profit allocation and stability. The paper first describes the construction of the set of feasible outcomes in commonly seen supply chain models, and then uses cooperative bargaining models to find allocations of the profit pie between supply chain partners. In doing so, several models are analyzed and surveyed, and include suppliers selling to competing retailers, and assemblers negotiating with component manufacturers selling complementary components. The second part of the paper discusses the issue of coalition formation among supply chain partners. An exhaustive survey of commonly used stability concepts is presented. Further, new ideas such as farsightedness among supply chain players are also discussed and analyzed. The paper also opens some avenues of future research in applying cooperative game theory to supply chain management.

Keywords: Supply chain management, Cooperative game theory, Bargaining, Coalitions

JEL Classification: C71, C78

Suggested Citation

Nagarajan, Mahesh and Sosic, Greys, Game-Theoretic Analysis of Cooperation Among Supply Chain Agents: Review and Extensions. to appear in European Journal of Operational Research; Marshall School of Business Working Paper No. IOM 04-06. Available at SSRN: https://ssrn.com/abstract=900744 or http://dx.doi.org/10.2139/ssrn.900744

Mahesh Nagarajan

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Greys Sosic (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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