On Bargaining for Supply Chain Revenue Allocation

דרור הרמל - המחלקה להנדסת תעשייה וניהול - מכללת אריאל

Abstract:

The issue of coordination in decentralized supply chains has received much attention in

the operations management literature. Specifically, contracts are suggested as

mechanisms to achieve this coordination. The issue of how the details of the contracts are

agreed upon is usually not addressed but empirical evidence, along with common

knowledge of practice, suggests that negotiations are usually used to construct these

contracts.

We present a negotiation model to arrive at profit sharing in a supply chain with a

pivotal agent (e.g. retailer) who interacts with N non-pivotal agents (e.g. suppliers). The

interaction between the agents is such that communication between the non-pivotal agents may, or may not be possible - for example these can be suppliers of complementary or partially substitutable products.

We study the two settings which differ, mainly, in the non-pivotal-agents' ability to communicate amongst themselves, possibly coordinating their actions. For each of the two possible settings we arrive at a prescribed allocation scheme

using an adaptation of the Nash bargaining framework where we focus on endogenous generation of the disagreement outcomes.

Surprisingly, our results have lucrative properties beyond the  axioms satisfied by any Nash bargaining solution, For the non-communicating setting, our result is a simple formula that prescribes the resulting allocations. We show, that this allocation constitutes a Nash-Nash equilibrium for an inter-related network of bargaining problems that are used to model the different interactions in the supply chain.  For the communicating case we show that, surprisingly, our allocation, which is a Nash bargaining solution, equals the Shapley value of a cooperative game related to our setting.

ההרצאה תתקיים ביום שלישי, 13.11.12, בשעה 14:00 בחדר 206, בנין וולפסון הנדסה, הפקולטה להנדסה, אוניברסיטת תל-אביב.