Cooperative game theory approach to allocating benefits of horizontal cooperation

S. Lozano, P. Moreno, B. Adenso-Díaz and E. Algaba

European Journal of Operational Research, 2013, vol. 229, issue 2, 444-452

Abstract: 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.

Keywords: Cooperative game theory; Supply chain management; Horizontal cooperation; Transportation synergies (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221713001677
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:229:y:2013:i:2:p:444-452

DOI: 10.1016/j.ejor.2013.02.034

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().