Erratum: The Stable Allocation (or Ordinal Transportation) Problem
Mathematics of Operations Research
A General Framework for the Study of Decentralized Distribution Systems
Manufacturing & Service Operations Management
A Three-Stage Model for a Decentralized Distribution System of Retailers
Operations Research
A Stochastic Programming Duality Approach to Inventory Centralization Games
Operations Research
Transshipment of Inventories: Dual Allocations vs. Transshipment Prices
Manufacturing & Service Operations Management
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The decentralized transshipment problem is a two-stage decision making problem where the companies first choose their individual production levels in anticipation of random demands and after demand realizations they pool residuals via transshipment. The coordination will be achieved if at optimality all the decision variables, i.e. production levels and transshipment patterns, in the decentralized system are the same as those of centralized system. In this paper, we study the coordination via transshipment prices. We propose a procedure for deriving the transshipment prices based on the coordinating allocation rule introduced by Anupindi et al. [1]. With the transshipment prices being set, the companies are free to match their residuals based on their individual preferences. We draw upon the concept of pair-wise stability to capture the dynamics of corresponding matching process. As the main result of this paper, we show that with the derived transshipment prices, the optimum transshipment patterns are always pair-wise stable, i.e. there are no pairs of companies that can be jointly better off by unilaterally deviating from the optimum transshipment patterns.