In this small essay, the problem of co-operation in business relationships and some solutions will be discussed using game theory. There are some different kinds of business relationships. However, the relationship between the firm and its competitors will be mainly investigated instead of covering all of them 1. The reason is that it is easy to adapt to other ones.
Let's start by considering a famous story to understand the problem of co-operation in business. The story's called Prisoner's Dilemma.
John and Peter have been arrested for robbing the bank and placed in separate isolation cells. The police do not have sufficient evidence to convict them unless one of them confesses. If neither confesses, they are convicted of a minor crime and are sentenced to 2 months. If both confess, they spend 12 months in jail. However, if one confesses and the other does not, the confessor is released immediately but the other is sentenced to 18 months in jail 12 for the crime and 6 for......
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Approximate Word Count: 1592
Approximate Pages: 7 (260 words per double-spaced page) |