Bargaining Games for Material Procurement in Large-scale Projects

Procurement management is an important process in large-scale projects because large-scale projects heavily depend on building materials from suppliers. This paper applies the basic idea of cooperative game theory and bargaining theory to analyze the cooperation in the procurement of the large-scale projects. We develop two bargaining games of the material procurement between one contractor and one supplier, where they form a procurement coalition. In addition, we give the allocation rule of cooperative surplus for the procurement coalition according to the bargaining theory, i.e., Subgame Perfect Nash Equilibrium solutions. The allocation plan is acceptable for the two players, very stable, and plays an important role in maintaining the survival of the procurement coalition. But the relative bargaining power of the players will determine who benefits more from cooperation.