Newsvendor game with supply uncertainty

In this paper, we study the newsvendor game with supply uncertainty, where multiple retailers form a coalition to cooperate to place orders to minimize the cost and share risk facing uncertain supplies and demands. After the orders are delivered and the demands are realized, the actual arrival quantities are allocated among the retailers to minimize the total cost. We compute the cost functions by using two-stage stochastic programming model and show that the cooperative game has a nonempty core. Also we propose a method to calculate an allocation in the core. © 2016 SERSC.