A game theory approach for solving the transshipment problem: a supply chain management strategy teaching tool

To describe how the well‐known Shapley Value concept from cooperative game theory can be used as an approach to solve the transshipment problem.

This paper provides a numerical example for a three‐person game in a non‐cooperative environment, a selected cooperative environment, and a fully cooperative environment. The well‐known Shapely Value concept from cooperative game theory is used as an approach to solve the transshipment problem and show “how” the pooling coalitions should be formed. The appurtenance of the Shapley Value is verified to ensure that a stable solution exists.

The primary focus of this paper is to describe how the well‐known Shapley Value concept from cooperative game theory can be used as an approach to solve the transshipment problem and show “how” the pooling coalitions should be formed.

While pooling coalitions are presented, this paper does not discuss revenue sharing.

This paper helps students understand “how to” make the right decisions about where they want to position themselves with respect to supply chain strategies.

The principal contribution of this approach is for establishing a pooling coalition in order to provide a more stable and cooperative solution. This paper also presents application to recent supply chain management business scenarios found in industry.