Cooperation in an HMMS-type supply chain: A management application of cooperative game theory

  • Imre Dobos Corvinus University of Budapest, Institute of Business Economics
  • Miklós Pintér Corvinus University of Budapest, Department of Mathematics, and MTA-BCE “Lendület” Strategic Interactions Research Group

Abstract

We apply cooperative game theory concepts to analyze a Holt-Modigliani-Muth-Simon (HMMS) supply chain. The bullwhip effect in a two-stage supply chain (supplier-manufacturer) in the framework of the HMMS-model with quadratic cost functions is considered. It is assumed that both firms minimize their relevant costs, and two cases are examined: the supplier and the manufacturer minimize their relevant costs in a decentralized and in a centralized (cooperative) way. The question of how to share the savings of the decreased bullwhip effect in the centralized (cooperative) model is answered by the weighted Shapley value, by a transferable utility cooperative game theory tool, where the weights are for the exogenously given “bargaining powers” of the participants of the supply chain.
Keywords: Optimal control, Supply chain, Bullwhip effect, Cooperative game theory, Weighted Shapley value
Published online
2013-06-14
How to Cite
Dobos, I. and Pintér, M. (2013) “Cooperation in an HMMS-type supply chain: A management application of cooperative game theory”, Periodica Polytechnica Social and Management Sciences, 21(1), pp. 45-52. https://doi.org/10.3311/PPso.2156.
Section
Articles