Simulation of Effects of Culture on Trade Partner Selection

The criteria that traders use to select their trade partners differ across cultures. The rational criterion of expected profit of the next contract to be negotiated dominates the decision in individualistic, egalitarian, uncertainty tolerant cultures. In other cultures, criteria like personal relations, group membership, status difference and trust may strongly influence trade partner selection. There also exist differences in the level of information about potential partners that traders require before entering into business contacts. This paper models the role of culture at the level of individual agents, based on Hofstede’s five dimensions of culture. The model is applied in multi-agent simulations, that are designed as a research tool for supply chain research. The model is implemented as a random selection process, where potential partners have unequal probabilities of being selected. The factors influencing the probabilities are: expected profit and trust (learnt from previous contacts with potential partners or reputation), common group membership, societal status, and personal relations. Results are presented, that indicate that Hofstede’s model can be used to simulate the effect of culture on the formation and maintenance of business relationships.