Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2018/11: Cooperative game-theoretic features of cost sharing in location-routing

Ondrej Osicka (), Mario Guajardo () and Thibault van Oost
Additional contact information
Ondrej Osicka: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Mario Guajardo: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Thibault van Oost: Louvain School of Management, Université catholique de Louvain, Postal: Université catholique de Louvain, Louvain School of Management, 1348 Louvain-la-Neuve, Belgium

Abstract: This article studies several variants of the location-routing problem using a cooperative game-theoretic framework. The authors derive characteristics in terms of subadditivity, convexity, and non-emptiness of the core. Moreover, for some of the game variants, it is shown that for facility opening costs substantially larger than the costs associated with routing, the core is always non-empty. The theoretical results are supported by numerical experiments aimed at illustrating the properties and deriving insights. Among others, it is observed that, while in general it is not possible to guarantee core allocations, in a huge majority of cases the core is non-empty.

Keywords: Collaborative logistics; Location-routing; Cooperative game theory; Cost allocation

JEL-codes: C00; C71

24 pages, September 24, 2018

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