A Cooperative Game Based Approach for Resource Pooling and Profit Sharing in Supply Chains

Abstract: This study addresses the strategic problem of supply chain formation on the basis of the quantities and prices of end-products to be manufactured and sold on a market. The manufacturing process is planned from the products bills of materials (BOM) and distributed on the resources available in the enterprises network. Resources are modeled as capacitated systems with piecewise-linear throughput functions of the workload. The problem of maximal profit generation and sharing among the firms of the network is analyzed and solved as a cooperative game. The proposed profit sharing rule is constructed from the dual of the profit maximization problem. It is both efficient and rational, with more fairness than the Owen rule of classical Linear Production Games. Copyright © 2012 IFA