Co-Opetition in Sustainability Initiative
44 Pages Posted: 22 Nov 2023
Abstract
Sustainability is important yet costly for most companies. This paper explores the dynamics of co-opetition, that is, cooperation among competitors, in sustainability initiatives. We study the strategic interaction of two competing brands' participation in the initiative by considering their market shares, consumer segments, and loyalties, as well as the change in profit margin and investment costs when participating. We characterize the circumstances where co-opetition may take place, which is mainly driven by the big brand. However, when one brand becomes too big, the possibility of co-opetition vanishes. A Prisoners' Dilemma, as well as two distinct multi-equilibrium outcomes, may arise, though some may be circumvented or intervened to attain the desired co-opetition outcome for the social good. The non-monotone nature of the profits in market factors implies that both the direct effect of the parameters and, more importantly, the indirect effect of the rival's strategy should be taken as a whole when contemplating one brand's best response to market changes. In our multi-brand extension, we find that one new type of multi-equilibrium outcome may occur but more importantly full cooperation among a large number of competitors is unlikely to happen.
Keywords: Sustainability, co-opetition, Game theory
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