Supply Chain Coordination Mechanism Design: Consensus Planning Protocol Meets Vickrey-Clarke-Groves Mechanism
Dirk Bergemann, Garrett van Ryzin, Jiaxuan Li

TL;DR
This paper develops a theoretical framework combining VCG mechanisms with the Consensus Planning Protocol to enable truthful, efficient collaboration between retailers and vendors, enhancing supply chain coordination.
Contribution
It introduces a novel integration of VCG and CPP mechanisms, preserving incentive compatibility and efficiency in complex supply chain environments.
Findings
Framework preserves dominant-strategy incentive compatibility.
Integration improves collaboration efficiency.
Activity fee design enhances retailer revenue.
Abstract
This paper introduces the theoretical framework for combining Vickrey-Clarke-Groves (VCG) mechanisms with the Consensus Planning Protocol (CPP) to enable truthful and efficient collaboration between a retailer and vendors to lower joint Cost to Serve. We demonstrate how this integration preserves both dominant-strategy incentive compatibility and efficiency in high-dimensional environments. We further introduce an activity fee design to improve its revenue property for the retailer while maintaining the mechanism's desirable properties. This CPP-VCG framework serves as the theoretical foundation for designing collaborative mechanisms to coordinates distributed, agent-based optimization between retailers and suppliers.
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