Title: | Cost Allocation for Joint Replenishment Models |
Authors: | Zhang, Jiawei |
Keywords: | Cooperative Game;Joint Replenishment;Strong Duality |
Issue Date: | Jul-2007 |
Publisher: | Stern School of Business, New York University |
Series/Report no.: | OM-2007-03 |
Abstract: | We consider the one-warehouse multiple retailer inventory model with a sub modular joint setup cost function. The objective of this model is to determine an inventory replenishment policy that minimizes the long-run average system cost over an infinite time horizon. Although the optimal policy for this problem is still unknown, a class of easy-to-implement power-of-two policies are 98% effective. This paper focuses on how the cost, under an optimal power-of-two policy, should be allocated to the retailers. This question generates an interesting cooperative game. We prove that this cooperative game has a non-empty core. The key to our result is a strong duality theorem for the one-warehouse multiple retailer problem under power-of-two policies. |
URI: | http://hdl.handle.net/2451/26277 |
Appears in Collections: | IOMS: Operations Management Working Papers |
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