The Research of the Profit Distribution Strategy Model in the Three-Level Supply Chain Based on the Cooperative Game Theory

Topics: Supply chain management, Game theory, Supply chain Pages: 18 (5282 words) Published: September 19, 2013
The Research of the Profit Distribution Strategy Model in the Three-level Supply Chain Based on The Cooperative Game Theory FU Wei-qiong

School of Management, Harbin University of Commerce, Harbin 150076

Abstract:Aiming at the three-level supply chain,this passage focus on how to distribute the profit of supply chain under a centralized strategy fairly and reasonably,as well as build up an effective strategy model of supply chain profit allocation based on cooperative game theory,and figure out the Shapley value of the benefit distribution. Besides that,the Shapley value could be modified according to the relevant factors of the benefit allocation of the joint enterprises,therefore work out the problem effectively of distributing profit reasonably in the supply chain. In addition,it is obvious to optimize the interest of the whole supply chain as well as maximize the partial interest of the joint enterprise,thus promoting and maintaining the operation of supply chain effectively and steadly. keywords:supply chain;cooperative game;profit distribution; Shapley value method

1.

1 INTRODUCTION

The supply chain, as a whole, is generally comprised of numerous independent economic entities. The overall interest derives from the sincere cooperation of the joint enterprises. It is wise to coordinate with the supply chain in order to operate effectively and steadly.Thus the whole profit of the supply chain among these cooperative corporations could be distributed more fairly and reasonably, as well as the operation could be promoted more stably in the long run. It is known to us that the profit of the supply chain system varies with the level of the alliance of joint enterprises in the supply chain. The higher level is, the more profit is. In order to make the operation of the supply chain system more efficiently and steadily in the long run, the interest need to be assigned equally,justly and reasonably.As we can see, the interest of the supply chain system is primarily allocated by the Shapley value method of the cooperative game theory.In addition,the Shapley value is modified for the differences of the cost input, risk exposure, and contribution of the joint entities, so that the profit of the supply chain system among the joint entities could be allocated more reasonably.

2 THE PROFIT ANALYSIS OF THE THREE-LEVEL SUPPLY CHAIN GAME ENTERPRISE

The whole profit will increase in the supply chain when the joint enterprises are collaborating,thus the reasonable distribution of the interest to maintain the efficient and steady operation has become the main problem to be solved.From the senior level to the junior level of the supply chain,in the proper order,are supplier(s),manufacturer(m),retailer(r).

For the three-level supply chain alliance,the member of each level can only ally with the adjacent member.Therefore,there are four kinds of relationships of alliances.

(1)Supplier(s),manufacturer(m),retailer(r),don’t combine with each other at all,making decisions independently.A record is kept of [s,m,r];

(2)Supplier(s),manufacturer(m)join in cooperation,while the retailer don’t take part in any alliances.A record is kept of [(s,m),r];

(3) manufacturer(m),retailer(r) join in cooperation, while the supplier don’t take part in any alliances.A record is kept of[s,(m,r)];

(4)Supplier(s),manufacturer(m),retailer(r) join in cooperation,making a centralized decision. A record is kept of[(s,m,r)].

If each joint entity’s profit is lower than the interest of noncooperation or part-cooperation when the enterprises come to alliances,the strategy will not be accepted by each joint cooperation.In order to gain more profit as well as promote the implementation smoothly,the interest of each joint firm is to be promised not lower than the profit of noncooperation or part-cooperation.Therefore,a profit distribution strategy which is facilitated for daily manipulating should be set up,so that the...
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