The stability of business - to - business group purchasing organizations with service-dependent demand

In this paper, we consider a two-echelon supply chain with a supplier and several retailers. Each retailer's demand is deterministic and depends on her service level. It may form the “LOOSEN” coalition among them whose service levels are different. Retailers within the coalition can aggregate the demand and order from the supplier together with a quantity discount. We analyze the service levels and discuses the stable structure of coalitions under four kinds of allocation rules using cooperative game theory. In particular, we find that the grand coalition is the stable structure of DSGPOs under Shapley allocation rule. For other allocation rules, the stable structure can be obtained by sorting corresponding parameters.