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The Use of Game Theory for Making Rational Decisions in Business Negotiations: A Conceptual Model

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  • Kęstutis Peleckis

    (Vilnius Gediminas Technical University, Lithuania)

Abstract

Objective: The objective of this paper is a comparative analysis of the world literature on game theory and its applicability for rational decision-making in negotiations and creation of a model supporting strategic decisions in negotiations. Research Design & Methods: Systematic, comparative, logical analysis and synthesis of the scientific literature. In order to create an algorithm of negotiations statements on theory of graphs, game theory and theory of heuristic algorithm were applied. Findings: The article proposes an algorithm which combines the game theory approach with heuristic algorithms in order to reflect the specifics of negotiations better. Such an algorithm can be used to support strategic decisions in negotiations and is useful for better understanding of the strategic management of negotiating processes. Implications & Recommendations: The proposed mathematical algorithm for the strategy formulation of international business negotiations can be used in electronic business negotiations, both as a standalone tool, or as partially requiring support by the negotiator. Contribution & Value Added: The game theory methods support rational solutions in business negotiations, as they enable to analyse the interacting forces. This is particularly relevant in international business negotiations, where participants from different cultures can be faced with numerous uncertainties.

Suggested Citation

  • Kęstutis Peleckis, 2015. "The Use of Game Theory for Making Rational Decisions in Business Negotiations: A Conceptual Model," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 3(4), pages 105-121.
    • Handle: RePEc:krk:eberjl:v:3:y:2015:i:4:p:105-121
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    References listed on IDEAS

    as
    1. Rufo, M.J. & Martín, J. & Pérez, C.J., 2014. "Adversarial life testing: A Bayesian negotiation model," Reliability Engineering and System Safety, Elsevier, vol. 131(C), pages 118-125.
    2. Kelly,Anthony, 2003. "Decision Making Using Game Theory," Cambridge Books, Cambridge University Press, number 9780521814621.
    3. Mandow, L. & Perez de la Cruz, J. L., 2003. "Multicriteria heuristic search," European Journal of Operational Research, Elsevier, vol. 150(2), pages 253-280, October.
    4. Lova, Antonio & Maroto, Concepcion & Tormos, Pilar, 2000. "A multicriteria heuristic method to improve resource allocation in multiproject scheduling," European Journal of Operational Research, Elsevier, vol. 127(2), pages 408-424, December.
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    Cited by:

    1. Pupentsova Svetlana V. & Gromova Elizaveta A., 2021. "Risk Management in Business Valuation in the Context of Digital Transformation," Real Estate Management and Valuation, Sciendo, vol. 29(2), pages 97-106, June.
    2. Gajdzik, Bożena & Gawlik, Remigiusz, 2018. "Choosing the Production Function Model for an Optimal Measurement of the Restructuring Efficiency of the Polish Metallurgical Sector in Years 2000–2015," MPRA Paper 83618, University Library of Munich, Germany.
    3. Gawlik, Remigiusz & Grzesik, Katarzyna & Kwiecińska, Monika, 2018. "Modelowanie AHP wyboru menadżera ds. integracji organizacyjnej w procesie fuzji przedsiębiorstw w kontekście teorii struktury rozwoju przywództwa [Choosing the merger’s organizational integration m," MPRA Paper 87798, University Library of Munich, Germany.
    4. Gawlik, Remigiusz, 2018. "Decision-making under environmental uncertainty," MPRA Paper 93361, University Library of Munich, Germany.

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    More about this item

    Keywords

    game theory; negotiation; rational; strategic decisions and negotiations support; heuristic negotiation model;
    All these keywords.

    JEL classification:

    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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