Outsourcing suppliers as downstream competitors: Biting the hand that feeds

In this paper, we highlight an aspect of supplier opportunism in the outsourcing paradox that has largely been ignored by extant research – the supplier as a direct competitor of the buyer firm. In light of this paradox, we offer a game-theoretic framework in which we identify conditions under which firms could alleviate or mitigate this outsourcing problem. Our results show that apart from transaction costs, firm-level capabilities (both ordinary and dynamic) play important roles in determining the make only, buy only, or make-and-buy options a firm could exercise in countering the threat of the supplier as a potential competitor in the downstream marketplace.     

Game options with gradual exercise and cancellation under proportional transaction costs

ABSTRACT

Game (Israeli) options in a multi-asset market model with proportional transaction costs are studied in the case when the buyer is allowed to exercise the option and the seller has the right to cancel the option gradually at a mixed (or randomized) stopping time, rather than instantly at an ordinary stopping time. Allowing gradual exercise and cancellation leads to increased flexibility in hedging, and hence tighter bounds on the option price as compared to the case of instantaneous exercise and cancellation. Algorithmic constructions for the bid and ask prices, and the associated superhedging strategies and optimal mixed stopping times for both exercise and cancellation are developed and illustrated. Probabilistic dual representations for bid and ask prices are also established.     

An evolutionary game theory model of binary opinion formation

A basic characteristic of most opinion models is that people tend to agree or compromise in the opinion interaction, which could be hopefully described by cooperative games in the evolutionary game theory framework. This paper presents game theory methods to model the formation of binary opinions: cooperative games are proposed to model the interaction rules of general people who tend to find an agreement; minority games are proposed to model the behaviors of contrarians; opinion preference is considered by varying the payoff values. The Majority Voter model could be restored from the proposed games. The game theory models show evolutionary results similar to traditional opinion models. Specially, the evolution of opinions with consideration of contrarians is in accordance with the Galam model. Furthermore, influences of evolving rule, network topology and initial distribution of opinions are studied through numerical simulations. Discussions about methods to promote or hinder the consensus state at the best equilibrium point are given.     

Chaotic switching in a two-person game

We study robust long-term complex behaviour in the Rock-Scissors-Paper game with two players, played using reinforcement learning. The complex behaviour is connected to the existence of a heteroclinic network for the dynamics. This network is made of three heteroclinic cycles consisting of nine equilibria and the trajectories connecting them. We provide analytical proof both for the existence of chaotic switching near the heteroclinic network and for the relative asymptotic stability of at least one cycle in the network, leading to some trajectories paying alternate visits to only two nodes while others follow a complicated sequence of visits to all nodes in the network. Our results are obtained by making use of the symmetry of the original problem, a new approach in the context of learning, and they provide an explanation of numerical results previously obtained by other authors.     

The incidence game chromatic number

We introduce the incidence game chromatic number which unifies the ideas of game chromatic number and incidence coloring number of an undirected graph. For k-degenerate graphs with maximum degree Δ, the upper bound 2Δ+4k−2 for the incidence game chromatic number is given. If Δ≥5k, we improve this bound to the value 2Δ+3k−1. We also determine the exact incidence game chromatic number of cycles, stars and sufficiently large wheels and obtain the lower bound for the incidence game chromatic number of graphs of maximum degree Δ.     

An acyclic relation for comparison of bargaining powers of coalitions and its interrelationship with bargaining set

This paper proposes a method to compare bargaining power of coalitions within the framework of games in coalition form with transferable utility. The method is expressed by a relation on the set of all coalitions in a game, the relation which is defined based on the players’ bargaining power. It is shown in this paper that the newly defined relation satisfies acyclicity. Also, it is verified in this paper that the set of all individually rational payoff configurations under which all coalitions have the equal bargaining power coincides with the bargaining set. Some examples demonstrate how the newly proposed method works.     

Directed defective asymmetric graph coloring games

We consider the following 2-person game which is played with an (initially uncolored) digraph D, a finite color set C, and nonnegative integers a, b, and d. Alternately, player I colors a vertices and player II colors b vertices with colors from C. Whenever a player colors a vertex v, all in-arcs (w,v) that do not come from a vertex w previously colored with the same color as v are deleted. For each color i the defect digraphD_i is the digraph induced by the vertices of color i at a certain state of the game. The main rule the players have to respect is that at every time for any color i the digraph D_i has maximum total degree of at most d. The game ends if no vertex can be colored any more according to this rule. Player I wins if D is completely colored at the end of the game, otherwise player II wins. The smallest cardinality of a color set C with which player I has a winning strategy for the game is called . This parameter generalizes several variants of Bodlaender’s game chromatic number. We determine the tight (resp., nearly tight) upper bound (resp., ) for the d-relaxed (a,b)-game chromatic number of orientations of forests (resp., undirected forests) for any d and a≥b≥1. Furthermore we prove that these numbers cannot be bounded in case a<b.     

Game-theoretic analyses of decentralized assembly supply chains: Non-cooperative equilibria vs. coordination with cost-sharing contracts

This paper considers a multiple-supplier, single manufacturer assembly supply chain where the suppliers produce components of a short life-cycle product which is assembled by the manufacturer. In this single-period problem the suppliers determine their production quantities and the manufacturer chooses the retail price. We assume that the manufacturer faces a random price-dependent demand in either additive or multiplicative form. For each case, we analyze both simultaneous-move and leader–follower games to respectively determine the Nash and Stackelberg equilibria, and find the globally-optimal solution that maximizes the system-wide expected profit. Then, we introduce appropriate buy-back and lost-sales cost-sharing contracts to coordinate this assembly supply chain, so that when all the suppliers and the manufacturer adopt their equilibrium solutions, the system-wide expected profit is maximized.     

Modeling secrecy and deception in a multiple-period attacker–defender signaling game

In this paper, we apply game theory to model strategies of secrecy and deception in a multiple-period attacker–defender resource-allocation and signaling game with incomplete information. At each period, we allow one of the three possible types of defender signals—truthful disclosure, secrecy, and deception. We also allow two types of information updating—the attacker updates his knowledge about the defender type after observing the defender’s signals, and also after observing the result of a contest (if one occurs in any given time period). Our multiple-period model provides insights into the balance between capital and expense for defensive investments (and the effects of defender private information, such as defense effectiveness, target valuations, and costs), and also shows that defenders can achieve more cost-effective security through secrecy and deception (possibly lasting more than one period), in a multiple-period game.