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Game Theory - Successful Negotiation in Purchasing: Requirements, Incentives and Award

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Applied game theory in purchasing has become an important tool in many companies for systematically achieving success in negotiations. The central building block of game-theoretically optimized awards are purchasing auctions. A basic knowledge of auctions and game theory is therefore particularly important for purchasers.

This book describes very clearly many helpful methods as well as their application in practice. Procurement situations which have a high volume, which are interesting for suppliers and whose performance can be well specified are particularly suitable for the use of game theory in purchasing. It also shows how cartels or restrained competition between suppliers can be identified using a purely data-based method.

Every purchase involves a sale. The book is therefore not only aimed at buyers. Auctions in procurement and the underlying game-theoretical principles also play an equally significant role for sellers.Applied game theory in purchasing has become an important tool in many companies for systematically achieving success in negotiations. The central building block of game-theoretically optimized awards are purchasing auctions. A basic knowledge of auctions and game theory is therefore particularly important for purchasers.

This book describes very clearly many helpful methods as well as their application in practice. Procurement situations which have a high volume, which are interesting for suppliers and whose performance can be well specified are particularly suitable for the use of game theory in purchasing. It also shows how cartels or restrained competition between suppliers can be identified using a purely data-based method.


Every purchase involves a sale. The book is therefore not only aimed at buyers. Auctions in procurement and the underlying game-theoretic principles also play an equally significant role for sellers.

Author(s): Christoph Pfeiffer
Publisher: Springer
Year: 2023

Language: English
Pages: 138
City: Wiesbaden

Preface and Acknowledgments
Contents
1 Introduction
References
2 Basic Game Theory Concepts
2.1 Normal Form
2.2 Dominance
2.3 Nash Equilibrium
2.4 Randomized Strategies and Second Mover Advantage
2.5 Extensive Form
2.6 Backward Induction
2.7 Evolutionary Game Theory
2.8 Mechanism Design
References
3 Examples of Applied Game Theory
3.1 Price Guarantees—A Case for the Cartel Office?
3.2 Location Choice
3.3 Number Selection and Level n Rationality
3.4 The Tragedy of the Commons
3.5 Price Fixing
3.6 Three Goals and a Car
3.7 From Duel to Truel and the Advantages of Weakness
3.8 Focal Points
3.9 The Prisoner’s Dilemma
3.10 The Repeated Prisoner’s Dilemma and the Evolution of Cooperation
3.11 You can win with stubbornness
3.12 The Ultimatum Game and the Perception of Fairness
3.13 The 100-Euro Auction
References
4 Purchasing Negotiations
4.1 The Basic Model of a Negotiation
4.2 Central Auction Formats
4.2.1 English and Japanese Auction
4.2.2 Dutch Auction
4.2.3 First-price Auction
4.2.4 Second-price Auction
4.2.5 Ausubel Auction
4.2.6 Average Price Auction
4.2.7 Multi-good Auctions
4.3 Further Aspects of Auction Design
4.3.1 The Winner’s Curse
4.3.2 Monetization of the Advantages and Disadvantages of an Offer
4.3.3 Credibility of the Mechanism
4.3.4 (Stochastic) Reserve Prices
4.3.5 Duration of the Auction
4.3.6 Ambiguity in the English Auction
4.3.7 The English-Dutch Auction
References
5 Data-based Identification of Cooperation between Suppliers
References
6 Case Studies
6.1 A Multi-good Auction with Partial Monopoly Markets
6.2 Chilean School Meals
6.3 Building a Factory in Mexico
References
7 Application and Limits of Game Theoretical Optimization
Reference
8 Conclusion
9 Appendix—Derivation of Optimal Bid in a First Price Auction