Developing a Two Person Game Theory to Improve Performance in Vertical Partnership Alliances

Abstract

The increasing rate of industrial development and growing knowledge intensity are constantly reforming most of businesses. The competitiveness in global market has changed, company for no longer creating, producing and delivering goods by themselves, but to having a partner which collaboratively improve how they do business. Strategic alliances in supply chain is a partnership between parties that can create new and more beneficial values. There are many studies determining factors that affect the performance of alliances and how the performance of alliances is assessed. The changes of value between partnership may affect the result of performances. Game theory is the study of mathematical modelling of multiperson

decision problems. The objective of this study is to apply game theory to improve performance in vertical partnership relationship. The performance will be determined based on series of simulation of some scenarios. The scenarios describe the level of factors that affect performances. It is expected that game theory would help each ally to make decision and improve the performance in partnership.