Optimal coalition structures in supply chains: a cooperative game approach to economic lot-sizing in emerging markets

Abstract

Building coalitions among autonomous entities with conflicting performance, beliefs, and capabilities is one of the most significant challenges in multi-agent systems. Optimal set partitioning of the players to maximise social welfare and distribute the cooperation payoff are two main research streams in this context. Nevertheless, achieving an integrated procedure for stable coalition formation remains a significant challenge in reaping the benefits of cooperation. Accordingly, this paper models a stable and optimal coalition structure using a solution concept in cooperative game theory. To do so, we use an exact mixed-integer model based on the least-core solution concept for a class of cooperative games known as the economic lot-sizing (ELS) game. We test the model on a complex problem in Iran’s rebar retail industry, an emerging economy, and validate it using Design of Experiments (DOE). The proposed model results indicate that the best condition for coalition formation among rebar retailers occurs when retailers’ demand is high across periods and joint ordering yields the lowest price from the closest supplier. Moreover, social welfare improvement is greater in this situation than in other scenarios.