Stability and monotonicity in newsvendor situations

Date
2012
Authors
Özen, U.
Erkip, N.
Slikker, M.
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Source Title
European Journal of Operational Research
Print ISSN
0377-2217
Electronic ISSN
1872-6860
Publisher
Volume
218
Issue
2
Pages
416 - 425
Language
English
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Abstract

This study considers a supply chain that consists of n retailers, each of them facing a newsvendor problem, and a supplier. Groups of retailers might increase their expected joint profit by joint ordering and inventory centralization. However, we assume that the retailers impose some level of stock that should be dedicated to them. In this situation, we show that the associated cooperative game has a non-empty core. Afterwards, we concentrate on a dynamic situation, where several model cost parameters and the retailers' dedicated stock levels can change. We investigate how the profit division might be affected by these changes. We focus on four monotonicity properties. We identify several classes of games with retailers, where some of the monotonicity properties hold. Moreover, we show that pairs of cooperative games associated with newsvendor situations do not necessarily satisfy these properties in general, when changes in dedicated stock levels are in concern.

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