Game theory studies the optimum payoffs for participants in a competitive situation in terms of whether cooperation or competition is the optimum strategy. It has led to the popularity of ‘win:win’ as a possible approach to negotiation outcomes. Game theory is relevant to procurement as it focuses on the behaviour of participants in non zero-sum games, such as commercial negotiations. Similarly, game theory can help understanding of market behaviour in some oligopolistic markets, which may be zero-sum games. For example, demand for very large passenger jets was too small to warrant both players developing their own aircraft, as both would lose money. If one company developed a new jet, that company would make a lot of profit and dominate the other player; if neither made a new jet, the status quo would prevail. See also Negotiation and Win:Win.« Back to Glossary Index
Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.