Explaining supplier-buyer partnerships: a dynamic game theory approach

Abstract Car manufacturers are introducing new purchasing policies in the European automotive industry. Aggregation of parts to form complete prefabricated systems is becoming the prominent way for suppliers to increase their competitiveness. This change implies new organizational arrangements between car manufacturers and suppliers to reflect a new relationship between traditionally adversarial firms. Using a game-theoretic approach, we emphasize, in this paper, that a partnership can only be accomplished, when the present uncertainty between the car manufacturer and the supplier can be drastically reduced. We show through a dynamic game construct and a case study how trust between suppliers and assemblers can be forged.

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