Trust and cooperation in buyer–seller relationships and networks. The co-evolution of structural balance and trust in iterated PD games

Our study has two aims: to elaborate theoretical frameworks and introduce social mechanisms of spontaneous co-operation in repeated buyer-seller relationships and to formulate hypotheses which can be empirically tested. The basis of our chain of ideas is the simple two-person Prisoner’s Dilemma game. On the one hand, its repeated variation can be applicable for the distinction of the analytical types of trust (iteration trust, strategy trust) in co-operations. On the other hand, it provides a chance to reveal those dyadic sympathy-antipathy relations, which make us understand the evolution of trust. Then we introduce the analysis of the more complicated (more than two-person) buyer-seller relationship. Firstly, we outline the possible role of the structural balancing mechanisms in forming trust in three-person buyer-seller relationships. Secondly, we put forward hypotheses to explain complex buyer-seller networks. In our research project we try to theoretically combine some of the simple concepts of game theory with certain ideas of the social-structural balance theory. Finally, it is followed by a short summary.

Price vs. quantity in oligopoly games

Price-setting and quantity-setting oligopoly games lead to extremely dierent outcomes in the market. One natural way to address this problem is to formulate a model in which some rms use price while the remaining rms use quantity as their decision variable. We introduce a mixed oligopoly game of this type and determine its equilibria. In addition, we consider an extension of this mixed oligopoly game through which the choice of the decision variables can be endogenized. We prove the emergence of the Cournot game.