Value Games

Matthew J. Sobel

Foundations and Trends(R) in Technology, Information and Operations Management, 2022, vol. 15, issue 3, 307-324

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.

Keywords: Markov Decision Processes; Logistics and Supply Chain Applications (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000102-5

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