Analysis of Cooperation in Supply Chains Using Game Theory

In recent years, supply chain management has evolved to become one of the most important fields of operations management. The advantages that can be derived from supply chain management are widely discussed. Surprisingly, aspects of stability and profit allocation have been more or less ignored so far. There is a lack of concepts for stability and profit allocation which are essential for the sustainability of supply chains. In this paper, cooperative game theory will be discussed concerning its potential to act as a rationality-based foundation for supply chain management. Interpreting a supply chain as a cooperation, the concepts of the core and the shapley-value are used for analyzing allocation problems. The core identifies the set of stable cooperation and the shapley-value is interpreted as an allocation algorithm based on an axiomatic framework. It is stated that cooperative game theory gives valuable insights for a rational view of supply chain management.