IDEAS home Printed from https://ideas.repec.org/a/spr/etbull/v8y2020i1d10.1007_s40505-019-00163-7.html
   My bibliography  Save this article

Self-enforcing cooperation via strategic investment

Author

Listed:
  • H. Moulin

    (University of Glasgow)

  • A. Seth

    (IIM Calcutta, Joka)

  • B. Taub

    (University of Glasgow)

Abstract

We investigate how, in a situation with two players in which noncooperation is the only equilibrium, cooperation can be achieved via costly investment. We find that in the resulting equilibria, cooperation is an all-or-nothing outcome, that is, either there is full cooperation by both players, or no cooperation at all. The cost of investment is unrelated to the degree of cooperation that is ultimately achieved, unless the cost is too high, in which case investment cannot in any degree overcome the disincentive to cooperate. Moreover, the positive externalities that players have on each other in the course of play, although they affect investment, are ultimately irrelevant to the degree of cooperation achieved. We view our model as an explanation for the formation and stable existence of business alliances, where the players are firms forming a partnership defined and sustained by contractual agreements, but which is short of a merger or acquisition.

Suggested Citation

  • H. Moulin & A. Seth & B. Taub, 2020. "Self-enforcing cooperation via strategic investment," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 1-11, April.
    • Handle: RePEc:spr:etbull:v:8:y:2020:i:1:d:10.1007_s40505-019-00163-7
    DOI: 10.1007/s40505-019-00163-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40505-019-00163-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40505-019-00163-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert W. Rosenthal, 1978. "Arbitration of Two-party Disputes under Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(3), pages 595-604.
    2. Pierre Dussauge & Bernard Garrette, 1995. "Determinants of Success in International Strategic Alliances: Evidence from the Global Aerospace Industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(3), pages 505-530, September.
    3. Bart Taub & Özgür Kibris, 2004. "Bargaining power in stationary parallelogram games," Review of Economic Design, Springer;Society for Economic Design, vol. 8(4), pages 449-464, April.
    4. Claudio Panico, 2017. "Strategic interaction in alliances," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1646-1667, August.
    5. David T. Robinson, 2008. "Strategic Alliances and the Boundaries of the Firm," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 649-681, April.
    6. Bernard Garrette & Pierre Dussauge, 1995. "Determinants of Success in International Strategic Alliances: Evidence from the Global Aerospace Industry," Post-Print hal-00458889, HAL.
    7. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rhoades, Dawna L. & Lush, Heather, 1997. "A typology of strategic alliances in the airline industry: Propositions for stability and duration," Journal of Air Transport Management, Elsevier, vol. 3(3), pages 109-114.
    2. Dirk Meissner, 2012. "The Economic Impact of Spillovers from R&D and Innovation," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 6(4), pages 20-31.
    3. Choi, Sukwoong & Kim, Wonjoon & Kim, Namil, 2022. "International alliance formations: The role of brokerage in technology competition networks," Journal of Business Research, Elsevier, vol. 144(C), pages 440-449.
    4. Ekaterina Turkina & Ari Van Assche, 2018. "Global Connectedness and Local Innovation in Industrial Clusters," CIRANO Working Papers 2018s-12, CIRANO.
    5. Kolloge, Konstantin, 2009. "Die Messung des Kooperationserfolges in der empirischen Forschung: Ergebnisse einer Literaturstudie," Arbeitspapiere 76, University of Münster, Institute for Cooperatives.
    6. Dewi Mustikaningsih & Ina Primiana & Sucherly & Erie Febrian, 2019. "Partnership Strategy Model in Developing Renewable Power Plant: Case Study in Indonesia," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 41-63.
    7. Zhang, Si & Li, Na & Li, Jizhen, 2017. "Redefining relational rent," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 315-326.
    8. Shin, Jong-Kuk & Park, Min-Sook & Ingram, Rhea, 2012. "Market orientation and communication methods in international strategic alliances," Journal of Business Research, Elsevier, vol. 65(11), pages 1606-1611.
    9. Ioana Filipas Deniaud & François Marmier & Didier Gourc & Sophie Bougaret, 2016. "A risk management approach for collaborative NPD project," Post-Print hal-01591960, HAL.
    10. Nielsen, Bo Bernhard, 2000. "Synergies In Strategic Alliances: Motivation And Outcomes Of Complementary And Synergistic Knowledge Networks," Working Papers 4-2000, Copenhagen Business School, Department of International Economics and Management.
    11. Heimeriks, K. & Duysters, G.M., 2004. "A study into the alliance capability development process," Working Papers 04.21, Eindhoven Center for Innovation Studies.
    12. Ariño, Africa, 1999. "Measures of collaborative venture performance: An analysis of construct validity," IESE Research Papers D/386, IESE Business School.
    13. Pascal Philippart, 2005. "La dialogique contrat-confiance dans la gestion des alliances interentreprises:une illustration dans l’industrie automobile," Revue Finance Contrôle Stratégie, revues.org, vol. 8(4), pages 177-203, December.
    14. Guffarth, Daniel & Barber, Michael J., 2014. "Network evolution, success, and regional development in the European aerospace industry," FZID Discussion Papers 96-2014, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    15. Lee, Joosung J. & Yoon, Hyungseok, 2015. "A comparative study of technological learning and organizational capability development in complex products systems: Distinctive paths of three latecomers in military aircraft industry," Research Policy, Elsevier, vol. 44(7), pages 1296-1313.
    16. David Zoogah & Mike Peng, 2011. "What determines the performance of strategic alliance managers? Two lens model studies," Asia Pacific Journal of Management, Springer, vol. 28(3), pages 483-508, September.
    17. Garrette, Bernard & Castaner, Xavier & Dussauge, Pierre, 2006. "The need for scale as a driver of alliance formation : choosing between collaborative and autonomous production," HEC Research Papers Series 821, HEC Paris.
    18. Farzaneh Soleimani Zoghi & Fatma Muge Aslan, "undated". "The Effect Of Relational Risk Perception On Suppliers Performance; An Empirical Study On Turkish Strategic Alliances," Review of Socio - Economic Perspectives 201712, Reviewsep.
    19. Das, T. K. & Teng, Bing-Sheng, 2001. "A risk perception model of alliance structuring," Journal of International Management, Elsevier, vol. 7(1), pages 1-29.
    20. Salvetat, David & Géraudel, Mickaël, 2012. "The tertius roles in a coopetitive context: The case of the European aeronautical and aerospace engineering sector," European Management Journal, Elsevier, vol. 30(6), pages 603-614.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:etbull:v:8:y:2020:i:1:d:10.1007_s40505-019-00163-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.