We study the location-inventory model as introduced by Teo et al. (2001) to analyze the impact of consolidation of distribution centers on facility and inventory costs. We extend their result on profitability of consolidation. We associate a cooperative game with each location-inventory situation and prove that this game has a non-empty core for identical and independent demand processes. This illustrates that consolidation does not only lower joint costs (which was shown by Teo et al. (2001)), but it allows for a stable division of the minimal costs as well.
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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number
602.04.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Meca, A. & Timmer, J. & Garcia-Jurado, I., 1999.
"Inventory games,"
Discussion Paper
53, Tilburg University, Center for Economic Research.
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