Journal
NETWORKS & SPATIAL ECONOMICS
Volume 12, Issue 1, Pages 129-146Publisher
SPRINGER
DOI: 10.1007/s11067-011-9154-y
Keywords
Supply chain; Coalitional games; Game theoretical model; Variational inequalities; Diagonalization algorithm
Funding
- National Science Council, Taiwan [NSC98-2410-H-006-011-MY2]
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Cooperative coalitional games study the selection of chain partners, the formation of supply chains and outcome allocations. The chain value of a coalition depends on the outcome of inter-chain competition. Subsequently, chain partners may accept their payoffs or decide to defect to another coalition that has made a higher tender offer. The formation and defection continues until a stable Cournot-Nash equilibrium is reached. This is the state where no player may unilaterally defect to another coalition and earn a higher profit. We formulate the cooperative coalitional game as a variational inequality problem and propose an iterative diagonalization algorithm to determine the steady state for the game. The computational results illustrated that (1) supply-chain competition may not necessarily preserve the same level of social welfare; (2) internalization of resources and costs may distort the general competition economy; and (3) wielding the power in a supply chain does not necessarily translate into higher profits.
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