Co-Opetitive Contracting in Service Value Networks

Abstract

Based on the graph-based Vickrey auction in service value networks introduced by Blau et al. [1], we analyze strategic behavior of service providers in networked formations regarding their opportunities to foster bilateral cooperative agreements. Introducing enforceable ex-ante agreements between adjacent service providers in a Service Value Network (SVNs), we investigate beneficial investment strategies that aim at reducing communication cost between sequentially composed services. The contribution at hand is twofold: Based on the foundation of SVNs and the efficient allocation of services through a graph-based Vickrey auction as presented in Blau et al. [1], [2] we (i) develop a model of cooperation and show analytically that, in the overall non-cooperative setting at hand, our model of cooperation implements a mutual weakly dominant strategy for adjacent service providers to reduce the cost of communication by customizing their service offerings. Transferring our results into practice, we (ii) demonstrate the valuable properties of our model of cooperation by providing a comprehensive application scenario.