The Benefit of Cooperation between Retailers under Supply Uncertainties
The focus of this paper is placed on evaluating the benefit of cooperation for two retailers with the same product who face suppliers with yield uncertainties. Two cooperation strategies are analyzed: one is inventory pooling and the other is centralized purchasing. The retailers’ expected profit functions under the two cooperation strategies with stochastic deliveries are first obtained, and then the optimal order quantities are identified and compared. Finally, the sensitivity of the benefits of cooperation to various input factors is examined through numerical examples. The study contributes to the literature by providing a better understanding of risk sharing and by shedding insights on the value of cooperation under supply risks.
KeywordsSupply Chain Wholesale Price Expected Profit Cooperation Strategy Total Profit
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