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Supply Chain Reliability and the Role of Individual Suppliers

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  • Hagspiel, Simeon

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

We study a one-period supply chain problem consisting of numerous suppliers delivering a ho- mogenous good. Individual supply is uncertain and may exhibit dependencies with other suppliers as well as with the stochastic demand. Assuming that reliability of supply represents an economic value for the customer that shall be paid accordingly, we first derive an analytical solution for the contribution of an individual supplier to supply chain reliability. Second, applying concepts from cooperative game-theory, we propose a payoff scheme based on marginal contributions that explic- itly accounts for the statistical properties of the problem. A number of desirable properties is thus achieved, including static efficiency as well as efficient investment incentives. Lastly, in order to demonstrate the relevance and applicability of the concepts developed, we consider the example of payoffs for reliability in power systems that are increasingly enetrated by interdependent variable renewable energies. We investigate empirical data on wind power in Germany, thereby confirming our analytical findings. In practice, our approach could be applied to design and organize supply chains and their reliability more efficiently. For instance, in the field of power systems, the approach could improve designs of capacity or renewable support mechanisms.

Suggested Citation

  • Hagspiel, Simeon, 2016. "Supply Chain Reliability and the Role of Individual Suppliers," EWI Working Papers 2016-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2016_005
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    References listed on IDEAS

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    Cited by:

    1. Ibrahim Abada, Andreas Ehrenmann, and Xavier Lambin, 2020. "On the Viability of Energy Communities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    2. Ibrahim Abada & Andreas Ehrenmann & Xavier Lambin, 2017. "On the viability of energy communities," Working Papers EPRG 1716, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Hagspiel, Simeon & Knaut, Andreas & Peter, Jakob, 2017. "Reliability in Multy-Regional Power Systems - Capacity Adequacy and the Role of Interconnectors," EWI Working Papers 2017-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 29 Jun 2018.

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    More about this item

    Keywords

    supply chain reliability; capacity uncertainty; individual contribution; cooperative game theory; shapley value; power system;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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