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Serial cost allocation in the cooperative purchasing organization

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Abstract

Under the seller’s quantity discount, buyers self-organize or rely on a third party to aggregate their purchasing quantities to obtain lower prices. Because of the unequal member contributions in the cooperative purchasing organization, the buyers’ strategy is different, the members often fluctuate, and the organizations do not sustain themselves. An effective mechanism is necessary to improve the performance of purchasing groups. We study the various forms of cost allocation mechanism in practice. Different allocation rules may have influence on the buyers’ behavior (i.e., purchasing quantities, whether joining the organization or not). We analyze the serial cost allocation and equilibrium purchasing quantity based on a Nash equilibrium, and the results show that each buyer is worse off when not participating in the existence buying organization of the other buyers. We further find that the serial mechanism just confirms the most efficient Nash equilibrium: reasonable cost allocation rule is necessary for the subjects to identify their optimal strategy.

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Authors and Affiliations

  1. Antai College of Economics and Management, Shanghai Jiaotong University, Shanghai, 200052, China

    Tao Zhang  (张 涛), Xin-shuai Song  (宋昕帅) & Feng Gu  (顾 锋)

  2. China College of Economic Administration of China University of Petroleum (East China), Qingdao, 266580, Shandong, China

    Tao Zhang  (张 涛)

  3. School of Mathematical Sciences, Fudan University, Shanghai, 200433, China

    Tian-zhou Gu  (顾天舟)

Authors
  1. Tao Zhang  (张 涛)
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  2. Tian-zhou Gu  (顾天舟)
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  3. Xin-shuai Song  (宋昕帅)
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  4. Feng Gu  (顾 锋)
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Corresponding author

Correspondence to Tao Zhang  (张 涛).

Additional information

Foundation item: the National Natural Science Foundation of China (No. 70932004), the Social Science Foundation of China (No. 11&ZD174), and the Foundation of Humanities and Social Sciences in Universities of Shandong (No. J13WG68)

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Zhang, T., Gu, Tz., Song, Xs. et al. Serial cost allocation in the cooperative purchasing organization. J. Shanghai Jiaotong Univ. (Sci.) 18, 749–755 (2013). https://doi.org/10.1007/s12204-013-1461-7

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  • DOI: https://doi.org/10.1007/s12204-013-1461-7

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