Should we cooperate? Game theory insights for servitization

Abstract

PurposeAn abundance of literature suggests that organisations adopting a cooperative approach achieve greater rewards than those that act in opposition or isolation. An emerging body of work also highlights the multiple actors involved in servitization. Despite this, in some contexts the benefits of servitization are not apparent. This paper examines business relationships in the oil industry and how they affect levels of servitization.Design/methodology/approachA mixed method study employing qualitative and quantitative methods was used to fully explore the context. In the quantitative phase, 48 oil industry specialists responded to a scenario based on game theory. This aimed to determine if the relationships between their respective organisations are cooperative or adversarial. Abduction drove a second qualitative phase. This consisted of a series of semi-structured interviews used to explore the servitization level and influence of servitization on relationships and vice versa.FindingsThe statistical results suggest that all parties used adversarial strategies despite the publicised intent to work cooperatively. The interviews suggested that increasing (decreasing) servitization could increase (decrease) cooperation and, in turn, value co-creation but revealed nuances to this effect. It also adds to our understanding of the darker side of servitization by illustrating the impact of mimetic isomorphism.Originality/valueThe findings add to understanding of the complex dynamics around servitization by showing that it is only at advanced levels of servitization that cooperative behaviour is observed, and base and intermediate levels result in non-cooperative behaviour and thus illustrate the importance of adopting a multi-actor lens to explore servitization.

A systematic review for organizing servitization by multi-actor collaborations: lenses, factors and outcomes

“…The service failure caused by any partner in the network can accumulate and nurture the dissatisfactions of customers, which may deteriorate the long-term relationships (Zhu and Zolkiewski, 2015). A recent study has uncovered that at the base and intermediate levels of servitization, all participants tend to pick hostile strategies despite their publicly cooperative attitudes (Wagstaff et al , 2021). There exists mimetic isomorphism for their non-cooperative behaviors resulting in the dark side of servitization.…”

“…Finally, regarding the possible outcomes, both positive and negative effects can be caused by multi-actor collaborations in the servitization process. As for the positive outcome, further efforts are needed to fully recognize its multi-facet nature and develop comprehensive performance measurement tools (Wagstaff et al , 2021). Moreover, the benefits allocation mechanism among the multiple participants in the servitization process has received scant attention where quantitative methods such as game theory can be applied.…”

Prosumption through advergames: leveraging on advergame format and reward elements to create a sacred brand

“…The application of game theory in Social Sciences ( vis-à-vis Physical Sciences) is further undermined by the occurrence of vague events (as compared to the precise Physical Science events), as uncertainty is deeply inherent in social phenomenon (Morgenstern, 1967). Wagstaff et al (2021, p. 835) underscore this aspect of imprecise application of game theory in the marketing domain through their findings for manufacturing organizations moving to servitization, where “all parties used adversarial strategies despite the publicized intent to work cooperatively.”…”

“…Therefore, noncooperative model is characterized by a lack of trust among members (Harth and Regner, 2017; Hartl et al , 2016). After all, the players are interested in maximizing their own payoffs and are wary of other players’ payoffs, thus focusing on adversarial strategies (Wagstaff et al , 2021). Given the understanding that a noncooperative game hampers interplayer trust, noncooperative advergame format is unlikely to impact cold BRQ through the trust component.…”

Static and Dynamic Game Theory in Common Oil and Gas Fields: A Literature Review and Bibliometric Analysis

“…Hence, the presence of multiple (Bratvold & Koch, 2011) argued that potential game theory applications in the oil and gas industry could be grouped into three main categories: (i) competitive bidding, in which companies usually face strong competition among themselves in bids or auctions for oil and gas exploration opportunities; (ii) negotiation between partners, allowing the companies to look at the negotiation from all possible sides, discovering key tradeoffs and accepting terms to create win-win solutions; and (iii) joint ventures and partnerships, in which oil and gas companies need to evaluate cooperation initiatives with their competitors, governments, investors and others, to understand their partners and develop strategies to achieve the best outcome. (Willigers et al, 2009) added two other potential practical applications: (iv) rivalry between service providers, whereby service companies generally compete to be suppliers of oil and gas companies and should decide their strategies based on the relationship between profitability and risks of losing the bid; and (v) employee unions relationship, whereby although oil and gas employees and corporate management might have conflicting objectives, both parties should understand each other and cooperate to maintain business sustainability (Bagheri Nasrabadi et al, 2022;Wagstaff et al, 2021). (Nakhle, 2008) complemented the saying that regional rivalries could be a potential source of many conflicts of interest that affect the oil and gas agents.…”