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Games 2013, 4(4), 754-775; doi:10.3390/g4040754
Article

External Pressure on Alliances: What Does the Prisoners’ Dilemma Reveal?

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Received: 15 September 2013; in revised form: 13 November 2013 / Accepted: 18 November 2013 / Published: 10 December 2013
Download PDF [222 KB, uploaded 10 December 2013]
Abstract: Prompted by a real-life observation in the UK retail market, a two-player Prisoners’ Dilemma model of an alliance between two firms is adapted to include the response of a rival firm, resulting in a version of a three-player Prisoners’ Dilemma. We use this to analyse the impact on the stability of the alliance of the rival’s competition, either with the alliance or with the individual partners. We show that, while strong external pressure on both partners can cause Ally-Ally to become a Nash equilibrium for the two-player Prisoners’ Dilemma, weak or asymmetric pressure that plays on the partners’ differing objectives can undermine the alliance. As well as providing new insights into how allies should respond if the alliance is to continue, this also illustrates how a third party can most effectively cause the alliance to become unsustainable. We create a new game theoretic framework, adding value to existing theory and the practice of alliance formation and sustainability.
Keywords: business alliances; mathematical model; game theory; Prisoners’ Dilemma business alliances; mathematical model; game theory; Prisoners’ Dilemma
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Binner, J.M.; Fletcher, L.R.; Kolokoltsov, V.; Ciardiello, F. External Pressure on Alliances: What Does the Prisoners’ Dilemma Reveal? Games 2013, 4, 754-775.

AMA Style

Binner JM, Fletcher LR, Kolokoltsov V, Ciardiello F. External Pressure on Alliances: What Does the Prisoners’ Dilemma Reveal? Games. 2013; 4(4):754-775.

Chicago/Turabian Style

Binner, Jane M.; Fletcher, Leslie R.; Kolokoltsov, Vassili; Ciardiello, Francesco. 2013. "External Pressure on Alliances: What Does the Prisoners’ Dilemma Reveal?" Games 4, no. 4: 754-775.


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