Single supplier multiple cooperative retailers inventory model with quantity discount and permissible delay in payments

We consider in this paper an Economic Order Quantity (EOQ) problem involving a single supplier that offers quantity discounts and allows retailers to delay payments. The retailers are tempted to form coalitions in order to minimize their costs. We propose a solution approach that generates stable coalition structures for the retailers taking into account the delay in payments and the discount quantity offered by the supplier. The proposed approach includes a decision rule that generates preferred coalitions for each retailer. Our decision rule reduces considerably the number of explored coalition structures in order to determine solutions in the core. Through an experimental investigation of the problem, we show the effectiveness of our approach in solving large scale problems and illustrate the effect of permissible delay in payments versus discount quantity on the coalition formation problem. 2010 Elsevier Ltd. All rights reserved.