Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
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The Proportional Method for Inventory Cost Allocation

재고비용할당을 위한 비례적 접근법

  • Lee, Dongju (Industrial & Systems Engineering, Kongju National University)
  • 이동주 (공주대학교 산업시스템공학과)
  • Received : 2018.10.24
  • Accepted : 2018.12.21
  • Published : 2018.12.31
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Abstract

The cooperative game theory consists of a set of players and utility function that has positive values for a subset of players, called coalition, in the game. The purpose of cost allocation method is to allocate the relevant cost among game players in a fair and rational way. Therefore, cost allocation method based on cooperative game theory has been applied in many areas for fair and reasonable cost allocation. On the other hand, the desirable characteristics of the cost allocation method are Pareto optimality, rationality, and marginality. Pareto optimality means that costs are entirely paid by participating players. Rationality means that by joining the grand coalition, players do not pay more than they would if they chose to be part of any smaller coalition of players. Marginality means that players are charged at least enough to cover their marginal costs. If these characteristics are all met, the solution of cost allocation method exists in the core. In this study, proportional method is applied to EOQ inventory game and EPQ inventory game with shortage. Proportional method is a method that allocates costs proportionally to a certain allocator. This method has been applied to a variety of problems because of its convenience and simple calculations. However, depending on what the allocator is used for, the proportional method has a weakness that its solution may not exist in the core. Three allocators such as demand, marginal cost, and cost are considered. We prove that the solution of the proportional method to demand and the proportional method to marginal cost for EOQ game and EPQ game with shortage is in the core. The counterexample also shows that the solution of the proportional method to cost does not exist in the core.

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References

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