EconPapers    
Economics at your fingertips  
 

When Friends Become Competitors: The Design of Resource Exchange Alliances

So Yeon Chun (), Anton J. Kleywegt () and Alexander Shapiro ()
Additional contact information
Anton J. Kleywegt: School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332
Alexander Shapiro: School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332

Management Science, 2017, vol. 63, issue 7, 2127-2145

Abstract: Many carriers, such as airlines and ocean carriers, collaborate through the formation of alliances. The rules of alliances are important for both the stability of the alliance and the profitability of the alliance members. In this paper, we address the design of resource exchange alliances, a type of alliance agreement widely used in practice, especially in the ocean cargo industry. Resource exchange alliances often increase competition among alliance members since the members can sell substitutable products after the exchange. We propose a resource exchange model that takes into account the resulting competition and alliance profit allocation among alliance members. The problem of determining the optimal amounts of resources to exchange is formulated as a stochastic mathematical program with equilibrium constraints (MPECs). Although MPEC problems are, in general, very difficult to solve, we successfully demonstrate an efficient solution approach and provide valuable insights for the resource exchange design problem. In particular, we show that the resource exchange alliance we propose can induce greater profit for the alliance members (both total and individual profits) even though it leads to greater competition.

Keywords: alliance; resource exchange; pricing; revenue management; stochastic mathematical programming with equilibrium constraints; noncooperative game (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1287/mnsc.2016.2434 (application/pdf)

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:inm:ormnsc:v:63:y:2017:i:7:p:2127-2145

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Walls ().

 
Page updated 2021-02-08
Handle: RePEc:inm:ormnsc:v:63:y:2017:i:7:p:2127-2145