Analysis of profit allocation strategies for competing networks by applying cooperative game theory within an agent-based model

In many industries there are possibilities to cooperate with supply chain partners in order to realise greater profits for the value chain as a whole. The responsibility for the allocation of profits realised by the cooperative network can be given to a third party, a network orchestrator. However, the allocation strategy that is applied for the network might determine what partners are attracted to the network and thereby what network profits are. Thus for a cooperative network to be successful in an environment of multiple competing networks it is essential that the right profit allocation strategy is applied for the partners in the network. In this paper we present an agent-based model of cooperative networks that compete for the best network partners. This model resembles different notions from cooperative game theory, but applies them to compare different allocation strategies in a competitive environment.We compare five different types of allocation strategies: allocation based on Gately point, Proportional allocation, Residual allocation, Even allocation, and Random allocation. Results suggest that Residual, Evenly, and Random allocation outperform the other two allocation strategies. The outcomes of this research should be studied into greater detail to increase the insights into the dynamics that lead to these results. Future work could also focus at expanding the model to explore factors other than the allocation strategy, such as transaction costs or penalties for leaving a network prematurely, that could be of relevance for the network profit