A stochastic evolutionary game perspective on the stability of strategic alliances against external opportunism

Abstract

This paper applies stochastic evolutionary game theory to analyzing the stability of cooperation among members against external opportunism in a multi-firm alliance. The authors first review the pros and cons of pertinent traditional models, and then a stochastic game model on decisions is proposed, where a coordination parameter, a time variable, a punishment effect and bounded rationality are considered. The Gauss white noise is introduced to reflect the random disturbance in the process. Several sufficient criteria on stability are developed, which enable us to investigate “if-then”type scenarios and project the impact of different strategies.