application of the cooperative game theory to global strategic alliances PDF
Preview application of the cooperative game theory to global strategic alliances
HELSINKI UNIVERSITY OF TECHNOLOGY Faculty of Electronics, Communications and Automation Tapio Savunen APPLICATION OF THE COOPERATIVE GAME THEORY TO GLOBAL STRATEGIC ALLIANCES Master's Thesis submitted to the Faculty of Electronics, Communications and Automation at Helsinki University of Technology for fulfilment of the requirements for the degree of Master of Science. Helsinki, 3 August, 2009 Supervisor Professor Jouko Lampinen Instructor Heikki Salovuori, M.Sc. ABSTRACT Author: Tapio Savunen Name of the thesis: Application of the Cooperative Game Theory to Global Strategic Alliances Date: 3 August, 2009 Language: English Pages: 129+10 Faculty: Faculty of Electronics, Communications and Automation Professorship: Computational Engineering, code: S-114 Supervisor: Professor Jouko Lampinen Instructor: Heikki Salovuori, M.Sc. The scope of this thesis is the application of the cooperative game theory to global strategic alliances. The objective is to find out how the cooperative game theory can be applied to global strategic alliances. Global strategic alliances are studied to understand the major questions of the alliance formation and the long-term stability. Various concepts of the cooperative game theory are investigated to find a feasible way to apply them to the modelling of strategic alliances. Three examples from literature are presented in which the cooperative game theory is applied to strategic alliances. Also a case study is introduced in which the global mobile operators’ alliances are modelled as cooperative games using the core solution concept. The literature examples and also the case study demonstrate that the theory of cooperative games can be applied to model the global strategic alliances. The stability and likelihood of strategic alliances can be assessed by modelling them as cooperative games. With this modelling the stability of strategic alliances can be assessed in the alliance formation. Also the business dynamics and changes in the business environment can be taken into account in order to understand the alliance’s long-term vitality. The case study demonstrates that the findings of the computational model of the strategic alliances reflect the respective findings made with qualitative methods. In the case study a new computational method is introduced to estimate an alliance’s long-term stability in the changing business environment. In this method the uncertain and changing business parameters are modelled with applicable probability distributions. By combining the Monte Carlo simulation and the core solution concept of the cooperative game theory, a measure called a stability indicator can be calculated. It reflects the stability of an alliance in the changing business environment. Keywords: game theory, cooperative games, strategic alliances, mobile operators, computational modelling, Monte Carlo simulation, core solution concept TIIVISTELMÄ Tekijä: Tapio Savunen Työn nimi: Yhteistyön peliteorian soveltaminen globaaleihin strategisiin liittoutumiin Päivämäärä: 3.8.2009 Kieli: Englanti Sivumäärä: 129+10 Tiedekunta: Elektroniikan, tietoliikenteen ja automaation tiedekunta Professuuri: Laskennallinen tekniikka, koodi: S-114 Valvoja: Professori Jouko Lampinen Ohjaaja: DI Heikki Salovuori Tutkimuksen tavoitteena on selvittää yhteistyön peliteorian sovellusmahdollisuuksia globaaleihin strategisiin liittoutumiin. Globaalien strategisten liittoutumien kirjallisuustutkimuksella analysoidaan liittoutumien muodostumiseen ja pysyvyyteen liittyviä tekijöitä. Yhteistyön peliteorian peruskäsitteet ja ratkaisukonseptit kuvataan ja käsitellään niiden sovellusmahdollisuuksia strategisiin liittoutumiin. Kolme kirjallisuusesimerkkiä kuvaa erilaisia yhteistyön peliteorian sovellustapoja strategisiin liittoutumiin. Työhön sisältyy tapaustutkimus, jossa muodostetaan laskennallinen malli globaalien matkapuhelinoperaattoreiden strategisista liittoutumista soveltamalla yhteistyön peliteoriaa. Käytetty ratkaisukonsepti on yhteistyöpelin ydin. Kirjallisuusesimerkit ja tapaustutkimus todentavat, että yhteistyön peliteoriaa voidaan soveltaa strategisten liittoutumien mallintamiseen. Liittoutumien muodostumisen todennäköisyyttä ja niiden stabiilisuutta voidaan arvioida yhteistyön peliteorian avulla. Myös liiketoiminnan dynamiikka ja liiketoimintaympäristön muutokset voidaan ottaa mallinnuksessa huomioon. Tämä mahdollistaa liittoutumien pitkän aikavälin elinkelpoisuuden tarkastelun. Tapaustutkimuksen avulla osoitetaan, että laskennallisen mallinnuksen avulla saatavat tulokset vastaavat strategisten liittoutumien kvalitatiivisen tutkimuksen tuloksia. Tapaustutkimuksen yhteydessä esitellään uusi menetelmä liittoutumien pitkän aikavälin stabiilisuuden arvioimiseksi liiketoiminnan muutoksissa. Liiketoimintaa kuvaavat epävarmat ja muuttuvat parametrit mallinnetaan soveltuvalla todennäköisyysjakaumalla. Tutkimuksessa osoitetaan, että yhdistämällä Monte Carlo -simulointi ja yhteistyöpelin ydin -ratkaisukonsepti, voidaan muodostaa stabiilisuusindikaattori, joka kuvaa liittoutuman pitkän aikavälin stabiilisuutta muuttuvassa liiketoimintaympäristössä. Avainsanat: peliteoria, yhteistyön pelit, strategiset liittoutumat, matkapuhelin- operaattori, laskennallinen mallintaminen, Monte Carlo -simulointi, yhteistyöpelin ydin iv PREFACE This thesis was completed at EADS Security & Communication Solutions in Helsinki, Finland. I would like to thank my superior Hannu Juurakko, M.Sc, for the assignments that have greatly contributed to my insight into practical cooperation between business partners. I would like to express my gratitude to the supervisor of this thesis, Professor Jouko Lampinen at the Helsinki University of Technology, for supporting and examining this thesis. I would also like to thank my instructor, Heikki Salovuori, M.Sc., for his valuable comments and guidance while writing this thesis and also for inspiring discussions and a long friendship. Also I would like to thank my dear wife Outi Susiluoto, M.Sc., for her patience, support and wise advice. Helsinki, 3 August, 2009 Tapio Savunen v TABLE OF CONTENTS ABSTRACT II TIIVISTELMÄ II PREFACE IV TABLE OF CONTENTS V SYMBOLS AND ABBREVIATIONS VII 1 INTRODUCTION 1 2 STRATEGIC ALLIANCES 4 2.1 Definition of Strategic Alliances 4 2.2 Motives for establishing a strategic alliance 7 2.3 Forms of Strategic Alliances 10 2.4 Value creation of Strategic Alliances 13 2.5 Strategic Alliances of Telecommunications Operators 17 3 GAME THEORY AND COOPERATIVE GAMES 25 3.1 Theory of games and economic behaviour 25 3.2 Classification of games 25 3.3 Nash equilibrium 28 3.4 Cooperative games 29 3.5 Solution concepts of cooperative games 32 3.6 Stable sets 33 3.7 The core 36 3.8 Shapley value and other one-point solutions 39 3.9 Cooperative games and Strategic alliances 46 vi 4 CASE STUDY: STRATEGIC ALLIANCES OF GLOBAL MOBILE OPERATORS 56 4.1 Introduction to the model of mobile operators’ alliances 56 4.2 Structure of the model and computational aids 59 4.3 Modelling the business of global mobile operators 60 4.4 Modelling mobile operator alliances 74 4.5 An alliance as a cooperative game 83 4.6 Results of the model 85 4.7 Stability indicator and behaviour patterns 94 4.8 Analysis of the results 95 5 DISCUSSION 97 6 CONCLUSIONS 101 REFERENCES 103 APPENDIX 1. RESULTS 109 APPENDIX 2. MATHEMATICA CODE 115 vii SYMBOLS AND ABBREVIATIONS Symbols bi i’s maximum contribution to a coalition max bi i’s minimum contribution to a coalition min c country C number of countries C expected future cash flow t (cid:1) set of all coalitions (cid:1) (.) core (cid:1)(.) strong ε-core ε E export of a country c G game hc home country ho home operator I import of a country c (cid:2)(cid:1) (.) least core m(.) lower vector of t-value M(.) upper vector of t-value M number of inhabitants in a country c n number of samples in the core Core n number of all samples samples N game theory: a set of players, a grand coalition; case study: number of proportionate subscribers N number of subscribers in a country c N number of subscribers in a network w o operator O number of operators P price PV present value Q quantity R (computational) revenue DR revenue impact (negative or positive) R total roaming revenue of top 10 global mobile operators R-Top10 R home roaming revenue RH R visited roaming revenue RV r discount rate% t s% percentual standard deviation of the additional revenue DR s(DR) standard deviation of the additional revenue s* player i’s best response to the strategies of other players i s element of the strategy set S i i S game theory: subset of N, S Œ N; case study: alliance viii S player i’s strategy set i t time in years T subset of N; T Œ N u(.) player i’s pay-off function i v(.) coalition (characteristic) function of a cooperative game vc visited country vo visited operator w network W number of networks x payoff vector; x œ (cid:1)S x dom y imputation x dominates another imputation y via S S X K lexicographic center X set of (pre)imputations X* set of feasible vectors y year G set of games d roaming discount ε coefficient of elasticity of demand d f Shapley value f operator’s share of home roaming revenue H f operator’s share of visited roaming revenue V h home operator’s retail margin j stability indicator l home operator’s share of the roaming revenue l balanced collection of weights S m mean p* egalitarian solution pS modified Shapley value pT relative threats solution p mobile services penetration of a country c p network level penetration of mobile services w σ game theory: solution function; case study: standard deviation t(.) t-value ix Abbreviations ACA Alternate Cost Avoided AM America Movil AMI Asia Mobility Initiative ARPU Average Revenue Per User BMA Bridge Mobile Alliance BT British Telecommunications CDMA Code Division Multiple Access CM China Mobile Ltd CU China Unicom DT Deutsche Telekom EDGE Enhanced Data rates for GSM Evolution ENSC Egalitarian Non-Separable Cost EU European Union EV-DO Evolution Data Optimized FCC Federal Communications Commission FMCA Fixed Mobile Convergence Alliance FT France Telecom GDP Gross Domestic Product GHz Giga Hertz GPRS General Packet Radio Service GSM Global System for Mobile communications HPAC Heating, Plumbing and Air-Conditioning ICT Information and Communication Technologies IP Internet Protocol MB Mega Byte MMS Multimedia messaging System MNO Mobile Network Operator MTS Mobile TeleSystems NTT Nippon Telegraph and Telephone OTA Over-The-Air PC Personal Computer R&D Research and Development SCRB Costs Remaining Benefits SIM Subscriber Identity Module SMS Short Message Service TI Telecom Italia TO2 Telefonica O2 UK United Kingdom UMTS Universal Mobile Telcommunications System US United States of America USD United States Dollar VF Vodafone W-CDMA Wideband Division Multiple Access x WLAN Wireless Local Area Network Billion means one thousand million.
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