Modeling alliance activity: an iterated prisoners' dilemma with exit option

We present and solve a new, more accurate model of behavior within alliance activity. The model is essentially an iterated prisoners' dilemma with an exit option in each stage of the alliance. The proposed solution results in each partner receiving its opportunity cost as its expected average p...

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Bibliographic Details
Published in:	Strategic management journal Vol. 26; no. 11; pp. 1057 - 1074
Main Authors:	Arend, Richard J., Seale, Darryl A.
Format:	Journal Article
Language:	English
Published:	Chichester, UK John Wiley & Sons, Ltd 01-11-2005 John Wiley and Sons
Subjects:	alliance Alliances Business economics Business management Business partnership Collaboration Corporate strategies Economic networks formal model Game theory International alliances Investment strategies iterated prisoners' dilemma Joint ventures Management science Modeling Opportunity costs Prisoner's dilemma Prisoners
Online Access:	Get full text
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Summary:	We present and solve a new, more accurate model of behavior within alliance activity. The model is essentially an iterated prisoners' dilemma with an exit option in each stage of the alliance. The proposed solution results in each partner receiving its opportunity cost as its expected average pay-off in the alliance. Managerial implications include: identification of where to focus efforts to improve alliance cooperation and performance; and an explanation for why more sophisticated partnership strategies than tit-for-tat are likely to be superior in this game.
Bibliography:	istex:B09B0D506020028FD591D9D7671939759C6CDE0D ark:/67375/WNG-C5WM10QR-P ArticleID:SMJ491 ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23
ISSN:	0143-2095 1097-0266
DOI:	10.1002/smj.491