Game theory and cost allocation problems
Management Science
Designing And Managing The Supply Chain
Designing And Managing The Supply Chain
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We describe an educational game in collaborative logistics. The game is based on an award-winning application in cost allocation in transportation. The purpose of the game is to acquire an understanding of negotiation, coalition building, and cost/profit sharing when the players have different powers and hold different levels of information. The game is played with each player representing a single company. The challenge for the players is to find an efficient coalition and to share the benefits and costs of the collaboration. We describe the underlying case study, review basic concepts in game theory, outline the teaching case, and discuss experiences from running the game in several countries and with students in business, engineering, and forestry.