Using cooperative game theory to contribute to strategy research

Abstract

Research Summary: A growing literature uses cooperative game theory to develop formal strategy theories of value creation and value capture. In a recent review, Gans and Ryall (2017) provide an introduction to this literature in which they emphasize the biform modeling framework of Stuart (1996, 2007). The purpose of this article is to extend the work of Gans and Ryall (2017) by (a) discussing the many ways that cooperative game theory and allied models can contribute to strategy research beyond the biform framework itself, and (b) offering recommendations for choosing among formal modeling options, both cooperative and noncooperative. Managerial Summary: Growing numbers of strategy scholars are using cooperative game theory to study strategic interaction and develop practical tools for managers, because it offers the mathematical precision of traditional formal modeling techniques while imposing fewer constraints on the actions of firms and managers. Gans and Ryall (2017) review cooperative game theory, with a particular focus on a version developed by Stuart (1996, 2007). This article extends Gans and Ryall (2017) by discussing the many additional ways that cooperative game theory can contribute to strategy research and how to choose between cooperative game theory and other formal modeling methods.

Computational modeling of entrepreneurship grounded in Austrian economics: Insights for strategic entrepreneurship and the opportunity debate

“…Furthermore, the model's level of analysis of innovation is the abstract notion of value, not the traditional and more tangible notions of product or process innovations that may involve a combination of new value creation and discovery of existing potential. The flexibility of the abstraction allowed generality but comes at the price of tangibility (Ross, ). The discussion on the opportunity debate in the penultimate section of this paper further clarifies the ways in which the KL model does and does not deal with subjective knowledge and opportunities.…”

“…For a recent review, see Gans and Ryall (2017). Ross (2018) elaborates on the CGT toolbox and how it may be used for theory development in strategy research.…”

“…Hence throughout this paper, I use the Keyhani-Lévesque model (henceforth referred to as the KL model) as a key reference point to appraise the prospect of grounding simulation models in Austrian economics. The KL model is particularly unique in its ability to play an integrative role, because it builds directly on a game-theoretic modeling framework that captures the equilibrium-based logic of competitive advantage, recently referred to as value capture theory or the value capture model (VCM; Gans & Ryall, 2017;Ross, 2018;Ryall, 2013), and on this foundation, adds disequilibrium-based dynamics of the entrepreneurial function using a computer simulation approach. 2 Hence the KL model can be viewed as a computational model of strategic entrepreneurship in the sense of 1 In this paper, in line with Austrian economics and the strategic entrepreneurship literature, I take a broad view of the definition of entrepreneurship, encompassing all entrepreneurial action, not just the creation of new firms.…”

Economizing and strategizing: How coalitions and transaction costs shape value creation and appropriation

“…All three results contain insights that can only emerge from a formal analysis of the strategic interaction between economizing and strategizing actors. We contribute to cooperative game theory in strategy research (Ross, 2018), which has previously been used mostly to study value appropriation rather than value creation (Adegbesan, 2009; Brandenburger & Stuart, 1996; MacDonald & Ryall, 2004; Ross, 2018). Cooperative models start by setting a value for each potential coalition and assuming the value‐maximizing coalition prevails.…”

Circular Economy Model for Recycling Waste Resources Under Government Participation: A Case Study in Industrial Waste Water Circulation in China

“…When we consider related waste disposal enterprises as an independent department in the circulatory system, this department forms a game relationship with the production department and the government. Many achievements have been made in using the game theory, including cooperative game (Ross, 2018), non-cooperative game (Namany, Al-Ansari, & Govindan, 2018), and complete information game (Tan, Liu, Wu, & Chen, 2018), to solve economic problems (van der Ploeg & de Zeeuw, 2016;Wenxia, Yundi, & Tianyang, 2015;Zhao et al, 2018). In the study of circular economy, Kurzban and Houser (2001) used the public goods game to show substantial individual differences in patterns of contributions to the circular public good.…”