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A Cooperative Coalitional Game in Duopolistic Supply-Chain Competition

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Abstract

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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Acknowledgement

This research was partially supported by grants NSC98-2410-H-006-011-MY2 of the National Science Council, Taiwan.

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Authors and Affiliations

  1. Department of Transportation and Communication Management Science, National Cheng Kung University, 1 University Road, Tainan, Taiwan, 701, Republic of China

    Cheng-Chang Lin

  2. Department of Distribution Management, Kao Fong College of Digital Contents, 38 Hsinhsing Road, Changjhih Township, Pingtung County, Taiwan, 908, Republic of China

    Chao-Chen Hsieh

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  1. Cheng-Chang Lin
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  2. Chao-Chen Hsieh
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Correspondence to Cheng-Chang Lin.

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Lin, CC., Hsieh, CC. A Cooperative Coalitional Game in Duopolistic Supply-Chain Competition. Netw Spat Econ 12, 129–146 (2012). https://doi.org/10.1007/s11067-011-9154-y

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  • DOI: https://doi.org/10.1007/s11067-011-9154-y

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