Cooperative game theory approach to allocating benefits of horizontal cooperation

► Horizontal cooperation can lead to substantial savings in transportation costs. ► A MILP model is used to estimate minimum costs for a given collaboration scenario. ► The resulting cost savings need to be allocated among the collaborating companies. ► Cooperative Game Theory provides a conceptual...

Full description

Saved in:
Bibliographic Details
Published in:European journal of operational research 2013-09, Vol.229 (2), p.444-452
Main Authors: Lozano, S., Moreno, P., Adenso-Díaz, B., Algaba, E.
Format: Article
Language:English
Subjects:
Alliances
Collaboration
Cooperation
Cooperative game theory
Cost control
Cost engineering
Cost reduction
Costs
Game theory
Games
Horizontal
Horizontal cooperation
Mathematical models
Operating costs
Shipments
Studies
Supply chain management
Transportation
Transportation problem (Operations research)
Transportation synergies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:► Horizontal cooperation can lead to substantial savings in transportation costs. ► A MILP model is used to estimate minimum costs for a given collaboration scenario. ► The resulting cost savings need to be allocated among the collaborating companies. ► Cooperative Game Theory provides a conceptual framework for cost savings allocation. ► Solution based on the concept of stability and coalition satisfaction are presented. Logistics costs in general, and transportation costs in particular, represent a large fraction of the operating costs of many companies. One way to try to reduce these costs is through horizontal cooperation among shippers. Thus, when the transportation needs of two or more companies are merged, their collective transportation requirements can be met at lower cost. The attainable cost savings are due to economies of scale, which translate into cheaper rates due to increased negotiation power, use of larger vehicles and bundling of shipments. In this paper, a linear model is presented and used to study the cost savings that different companies may achieve when they merge their transportation requirements. On the one hand, solving this optimization model for different collaboration scenarios allows testing and quantifying the synergies among different potential partners, thus identifying the most profitable collaboration opportunities. On the other, the problem of allocating the joint cost savings of the cooperation is tackled using cooperative game theory. The proposed approach is illustrated with an example in which different cooperative game solution concepts are compared. Extensive numerical experiments have also been carried out to gain insight into the properties of the corresponding cost savings game and the behavior of the different solution concepts.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2013.02.034