Using mechanism design theory in negotiations to improve purchasing performance

Making the most of game theory in the supplier selection process for complex items

“…Game theory may be used for explanation, prediction or prescription in various circumstances (Dixit and Skeath 1999). Mechanism Design Theory is an evolution of game theory and goes a step further by selecting the optimal rules of the game (Börgers 2015;Schulze-Horn et al 2018). Based on the above, this paper argues that if a buyer is able to design a supplier selection process with several qualified suppliers (players) that compete in a predefined process (order) in order to win a pre-established award (payoff), then the possible decisions by suppliers (strategies or choices) can be influenced by the buyer's interest.…”