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Value Games

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  • Matthew J. Sobel

Abstract

Large literatures in operations and economics analyze dynamic models of profit-optimizing firms. The insights and algorithms in these literatures can be adapted to maximize value if the model ignores external strategic interactions and any risk of bankruptcy. The insertion of external strategic interactions in such a model converts it to a sequential game. This work shows that the resulting sequential games are analogous to dynamic optimization models of the firm in the following sense. Insights and algorithms based on sequential games with a profit criterion and negligible bankruptcy risk can be adapted to their value-criterion counterparts. The illustrations in this work are a model of the palm oil supply chain in Indonesia and a dynamic oligopoly in which inventories affect competition between firms.

Suggested Citation

  • Matthew J. Sobel, 2022. "Value Games," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 307-324, July.
    • Handle: RePEc:now:fnttom:0200000102-5
    DOI: 10.1561/0200000102-5
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    References listed on IDEAS

    as
    1. de Zegher, Joann F. & Iancu, Dan A. & Plambeck, Erica, 2018. "Sustaining Rainforests and Smallholders by Eliminating Payment Delay in a Commodity Supply Chain--It Takes a Village," Research Papers 3684, Stanford University, Graduate School of Business.
    2. Kirman, Alan P & Sobel, Matthew J, 1974. "Dynamic Oligopoly with Inventories," Econometrica, Econometric Society, vol. 42(2), pages 279-287, March.
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