Biform Games

Both noncooperative and cooperative game theory have been applied to business strategy. We propose a hybrid noncooperative-cooperative game model, which we call a biform game. This is designed to formalize the notion of business strategy as making moves to try to shape the competitive environment in a favorable way. (The noncooperative component of a biform game models the strategic moves. The cooperative component models the resulting competitive environment.) We give biform models of various well-known business strategies. We prove general results on when a business strategy, modelled as a biform game, will be efficient. ∗Bob Aumann, Pierpaolo Battigalli, David Collis, Karen Feng, Amanda Friedenberg, Rena Henderson, John Hillas, Jerry Keisler, Vijay Krishna, Andreu Mas-Colell, Barry Nalebuff, John Sutton, and many participants at seminar presentations of this work provided important input. We are especially indebted to Louis Makowski and Joe Ostroy for extensive discussions, and to Ken Corts and Elon Kohlberg for several valuable observations. The associate editor and referees made very helpful comments and suggestions. Financial support from Columbia Business School, Harvard Business School, and the Stern School of Business is gratefully acknowledged. bg-02-24-06