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Inventory centralization with risk-averse newsvendors

Jiahua Zhang (), Shu-Cherng Fang () and Yifan Xu ()
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Jiahua Zhang: Fudan University
Shu-Cherng Fang: North Carolina State University
Yifan Xu: Fudan University

Annals of Operations Research, 2018, vol. 268, issue 1, 215-237

Abstract: Abstract In the paper, we study the inventory centralization problem with risk-averse newsvendors using cooperative game theory. Pareto-optimality and collective rationality conditions are adopted to characterize the stable profit allocations among coalition members. Pareto-optimal profit allocation rules are derived for exponential and power utilities while the necessary and sufficient conditions are shown for stable profit allocations. We also show that the game model has a nonempty core when the exponential and power utilities are adopted to describe the risk-averse behavior.

Keywords: Inventory centralization; Risk-averse; Risk sharing; Pareto-optimality; Core (search for similar items in EconPapers)
Date: 2018
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