Contents lists available at ScienceDirect Socio-Economic Planning Sciences journal homepage: www.elsevier.com/locate/seps Relief aid stocking decisions under bilateral agency cooperation Abdullah Coskun a , Wedad Elmaghraby b ,M.MugeKaraman a,1 ,F.SibelSalman a,∗ a Industrial Engineering Department, Koc University, Istanbul, Turkey b Robert H. Smith School of Business, University of Maryland, MD, USA ARTICLEINFO Keywords: Inventory Relief aid Game theory Agency cooperation Disaster risk ABSTRACT We aim to quantify the beneftsof cooperation between humanitarian relief agencies in terms of stocking de- cisions.Weconsidertwoagenciesthatstockthesametypeofreliefitematdiferentlocationspronetoindividual disaster risks and agree to transship the shortage amount from available stocks in case of a disaster. We in- corporatethedisasterrisktotheNewsvendormodelbyconditioningthestockquantitydecisionsontheevent thatamajordisasteroccurswithinthelifetimeofthestockedreliefitem.Weoptimizethestockquantityforeach agencyinresponsetotheother'squantityandcomputeaNashEquilibriumsolutionnumerically.Weapplythis gametheoreticapproachtothecaseofearthquakepreparednessinIstanbultooptimizethestockingdecisionsof anagencyforshelterunitsincooperationwithanotheragency.Weinvestigatethecharacteristicsofthesolutions undervariousparametersettingsandidentifycasesinwhichcooperationmaybebenefcialtooneorbothofthe agencies. 1. Introduction Humanitarian relief involves the provision of life-saving support to the people in need, including the victims of disasters. Besides their contributions to long term development and recovery projects, huma- nitarianrelieforganizations(HROs)participateinmassivereliefeforts during and after a disaster to provide life-supporting resources and distribute relief supplies. Relief supplies are items that are vital for survival, such as food, water, temporary shelter units, blankets, stoves andmedicine,amongothers.Insuddenon-setdisasters,havingastock of relief items on hand enables fast delivery of the items to those in need.However,over-investmentininventorypreventstheuseofscarce funds in better means and may be avoided by cooperation among agencies and efective stocking decisions in the pre-disaster stage. In this study, we aim to optimize relief item stocking decisions and quantify the beneftsof bilateral cooperation between HROs. The International Federation of Red Cross and Red Crescent Societies (IFRC) is the world's largest humanitarian network that re- presents190NationalSocieties(NSs)andcarriesitsoperationsthrough the work of over 17 million volunteers worldwide [16]. It is actively involved in disaster preparedness and response. The Logistics, Pro- curement and Supply Chain Management (LPSCM) Department of the IFRC is a recognized provider of humanitarian logistics services with the key mission of supporting the core work of the Red Cross Red Crescentnetwork[16].IFRCholdspre-positionedstockgloballyatfve strategically located regional logistics units, each one having a dedi- cated zone to service. The current stocks are sufcient to meet the immediate needs of 450,000 people. The service goal is to deliver the stocked supplies to afected areas anywhere in the world within 24–48h when emergencies strike. IFRC supports numerous humani- tarian operations each month across the world. In response to an ap- peal, the LPSCM Department of IFRC may provide in-kind or cash do- nations. Cash donations are generally used for procurement of relief items at the local level, from suppliers through existing agreements which allows the host NS to withdraw items from the suppliers' ware- houses. However, the high uncertainty in needs creates a serious shortage risk. A critical question for the LPSCM Department is how muchtokeepascashandhowmuchtoinvestinpre-positionedstocks. Essentially, they prefer to keep more cash and less stock in regions where a strong local supplier network exists. Then, NSs can hedge against the risk of immediate shortage by bilateral agreements with otherNSsorHROs. Since IFRC responds to emergency incidents frequently, its in- ventory turnover is expected to be high. On the other hand, for a NS, theuseofitsstockslargelydependsonthelocaldisastereventsthatare rarebuthavehighimpact.Thequestionofhowmuchtostockbecomes moreimportantforaNSsinceitishighlylikelythatnomajordisaster occurs before the stocked items reach the end of their lifetime. Thus, https://doi.org/10.1016/j.seps.2018.10.009 Received6July2018;Receivedinrevisedform19October2018;Accepted21October2018 ∗ Corresponding author. E-mail address: ssalman@ku.edu.tr (F.S. Salman). 1 Present address: Center for Magnetic Resonance Research, University of Illinois at Chicago, USA. Socio-Economic Planning Sciences xxx (xxxx) xxx–xxx 0038-0121/ © 2018 Elsevier Ltd. All rights reserved. Please cite this article as: Coskun, A., Socio-Economic Planning Sciences, https://doi.org/10.1016/j.seps.2018.10.009