Optimal strategies and profit allocation for three-echelon food supply chain in view of cooperative games with cycle communication structure

Abstract

This paper focuses on optimal strategies and the profit allocation of the three-echelon food supply chain (FSC) formed by a farmer, a food processor and two retailers. By comparing optimal strategies in the decentralized and the centralized scenarios, we find that the centralized scenario generates the largest profit. On this basis, considering the supply chain link cycle structure and the coalition restriction caused by the technology, the division of the labor, the politics and the history reasons, this paper adopts the average tree solution to distribute the profit. To illustrate the superiority of the new distribution scheme, a numerical example is given to compare the new scheme with five previous allocation mechanisms. The results show that the new scheme is more practical and more reasonable than the previous ones. This paper proposes the first method using the cooperative game theory with the communication structure to allocate the profits of FSC with a link cycle.