Supply chain collaboration: A Game-theoretic approach to profit allocation
Abstract: This paper aims to
develop a theoretical framework for profit allocation, as a mechanism for
aligning incentives, in collaborative supply chains.
Design/methodology/approach: The issue of profit distribution is
approached from a game-theoretic perspective. We use the nucleolus concept. The
framework is illustrated through a numerical example based on the Beer Game
scenario.
Findings: The nucleolus offers a powerful perspective to tackle this
problem, as it takes into consideration the bargaining power of the different
echelons. We show that this framework outperforms classical alternatives.
Research limitations/implications: The allocation of the overall supply
chain profit is analyzed from a static perspective. Considering the dynamic
nature of the problem would be an interesting next step.
Practical implications: We provide evidence of drawbacks derived from
classical solutions to the profit allocation problem. Real-world collaborative
supply chains need of robust mechanisms like the one tackled in this work to
align incentives from the various actors.
Originality/value: Adopting an efficient collaborative solution is a
major challenge for supply chains, since it is a wide and complex process that
requires an appropriate scheme. Within this framework, profit allocation is
essential.
Keywords: Beer Distribution
Game, Game Theory, Incentive Alignment, Profit Allocation, Supply Chain
Collaboration
Author: Borja Ponte, Isabel
Fernández, Rafael Rosillo, José Parreño, Nazario GarcÃa
Journal Code: jptindustrigg160054
