Cooperation Between Multiple Newsvendors with Warehouses

This study considers a supply chain that consists of n retailers, each facing a newsvendor problem, and m warehouses. The retailers are supplied with a single product via some warehouses. In these warehouses, the ordered amounts of goods of these retailers become available after some lead time. At the time that the goods arrive at the warehouses, demand realizations are known by the retailers. The retailers can increase their expected joint profits if they can coordinate their orders and make allocations after demand realization. For this setting, we consider an associated cooperative game between the retailers. We show that this associated cooperative game has a nonempty core. Finally, we introduce a noncooperative game, where the retailers decide on their order quantities individually, and show that the set of payoff vectors resulting from strong Nash equilibria corresponds to the core of the associated cooperative game.