Profit allocation on a four-echelon supply chain in perspective of cooperative games on augmenting systems

Abstract

Profit allocation is an important research topic in supply chain enterprises, where the rationality of allocation determines the stability of their cooperative relationships. This paper focuses on the profit allocation of the supply chain dominated by upstream enterprises. To achieve this goal, a general four-echelon supply chain is constructed. By analyzing the drawbacks of the existing profit allocation methods, we propose three new Shapley values to deal with the different risk attitudes of players. Through theoretical discussions, we can see that the proposed new Shapley values endow upstream participants with profit priority. It shows that the new profit distribution mechanisms suit supply chains dominated by upstream enterprises. We also provide an application example to check the concrete distribution results of the proposed new Shapley values and to compare the experimental results of the proposed new Shapley values with the existing Shapley values to deal with Profit allocation on a four-echelon supply chain. As a result, the proposed new Shapley values outperform the previous Shapley values to deal with the profit allocation on a four-echelon supply chain from the perspective of cooperative games on augmenting systems.