The potential of Cooperative Game Theory for Supply Chain Management

Abstract

In this paper Supply Chain Management will be analyzed in the light of Game Theory. The aim of the paper is to show the applicability of Cooperative Game Theory as methodology for analyzing supply chains. A main characteristic of a supply chain is cooperation. The success and sustainability of cooperation depends on the stability as constituting element. Cooperation can be analyzed with Cooperative Game Theory. The Shapley-Value is used as algorithm to allocate the profit among the cooperating partner. But for supply chains the structure is relevant. The Myerson-Value takes the structure of a game into account when formulating a specific allocation rule. Cooperative game theory can be applied as methodology for Supply Chain Management contributing an allocation algorithm. © 2005 Physica-Verlag Heidelberg.