How companies can use game theory to gain advantage in business negotiations
Game Theory has contributed greatly to important findings in the academic world, especially in Economics as various Nobel Memorial prizes for Economic Sciences have proven. But still to date, it has hardly found its way into actual business life. Generally, there is quite a large gap to bridge between theoretic modeling of real life situations and day-to-day activities of companies.
However, when looking at one of the key activities of any business – negotiations between Sales and Procurement – practical application of theoretical knowledge actually works quite well.
Innovative companies have started to apply Game Theory to systematically position themselves into more favorable situations. In cases of significant market power, companies use Game Theory to completely break with conventional forms of negotiation and define rules of negotiation to their maximum advantage (“mechanism design”).
A.T. Kearney have successfully supported multiple clients in designing and implementing Game Theory based negotiations and are eager to share and discuss their insights from a practical perspective.
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