Using Game Theory to Model Channel Relationships

Abstract

Moorthy (1985) introduced into the marketing literature a selective exposition of the basic concepts of noncooperative game theory and their application to various marketing decisions, including the modeling of channel relationships. Applications of game theory, however, are not new in marketing. Bargaining research has long used gaming matrices (e.g. the prisoner's dilemma game) as a means of operationalizing exchanges between individuals who have been brought together in a mixed motive, interdependent relationship (e.g. Dwyer and Walker, 1981; Green, Gross and Robinson, 1967, 1970; Slusher, Roering and Rose, 1970; Tedeshi, Schlenker and Bonoma, 1973). The purpose of this paper is to introduce interested reader to the major conceptual limitations of game theory and then to suggest needed areas of research. Within this context, Kelley and Thibaut’s (1978) Theory of Interdependence will also be discussed.