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Coalition formation in collaborative production and transportation with competing firms

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  • Basso, Franco
  • Basso, Leonardo J.
  • Rönnqvist, Mikael
  • Weintraub, Andres

Abstract

Because of its importance in logistics costs, transportation is usually seen as the primal activity for which horizontal collaboration should be pursued. Yet, just a few cases are reported and these have been operated during limited time. We offer here an explanation, by departing from the operational research models used to date, where collaborative contracts are signed when both quantities and prices are fixed. In this paper, we consider a coalition formation game but before market equilibrium; that is, we propose a collaborative model in which, after the agreements are signed, different firms and coalitions compete in multiple markets in Cournot fashion. When this happens, the formation of one set of coalitions affects prices and production levels of all other competitors. We propose multiple models to respond the question of which coalitions would form in this setting, including stability constraints and the restriction that antitrust authorities should accept the agreement. Our main finding is that opposed to what has been found in the literature to date, forming coalitions that are beneficial to firms in the agreement and at the same time be susceptible to be cleared by antitrust authorities is quite hard. We also assess computational time issues for larger instances.

Suggested Citation

  • Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.
  • Handle: RePEc:eee:ejores:v:289:y:2021:i:2:p:569-581
    DOI: 10.1016/j.ejor.2020.07.039
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