Authors: Judit Simon; Tibor Mandjak; Zoltán Szántó; Zsuzsanna Szalkai
Abstract
Business relationships and business networks are phenomena of the business world. This
paper proposes that the application of game theory (in other words the world of strategic
rationality) and social network analysis allows a deeper understanding and a useful typology
of business relationships. At the same time this combined approach can be helpful for a
scientific explanation of business networks by discovering the formation and development of
some network structures. Additionally, it enables the modelling of decision-making in case of
interdependency and embeddedness, the quantification of decision outcomes and – with
certain limitations – forecasting behaviour of involved actors.
Social network methodology is ideal to analyse the structural features and embeddedness of
business relationships. This mutual or embedded influence is essentially in the interaction
process which purpose is the exchange, mutual value creation and value sharing. The business
relationship itself is a tissue of exchange episodes and connected layers. And in the
terminology of social network analysis: the business relationship is a network of multiplex
relations.
Concepts and models in game theory seem to be well fitted to deal with business relationships
considered as interdependent rational choices. The games can be classified as zero-sum pure
conflict games or variable sum pure coordination games. The former type means that players
can only act according to their interest while hurting other players, while in the latter type the
interests of the players coincide. We may find mixed motive games discussed in applied game
theory between these two extreme types, where the conflicting and coincident interests coexist.
We think that business relationships and networks may be better understood with the
help of these games. We outline two such applications – buyer-seller market cooperation and
market competition between sellers – by using the prisoner’s dilemma game.
In both cases we investigate situations where a conflict arose in business relationships
between the short term unique interests and the long-term common interests. We try to
decrease the high abstraction level – inevitable in game theoretical modelling – by taking into
account the social networks forming as a result of business communications, thus we try to
improve the explanatory power of the models.
Key words: business relationships, game theory, embedded games, social network analysis
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Conference: Glasgow, Scotland (2011)