in Business Collaboration

Ting Hei Gabriel Tsang Department of Computing Macquarie University Sydney, Australia [email protected]

Abstract and their privileges. Given a request to access a resource or perform an operation, the service en- Game Theory has been studied in several areas forces the policy by analysing the credentials of such as Mathematics and Economics and it the requester and deciding if the requester is au- helps to choose a better to maximise thorised to perform the actions in the request their profit or improve their quality. However, B2B integration is basically about the secured it does not have many studies about applying coordination of information among businesses game theory to business collaboration. In this paper, we take negotiation of access control and their information systems. It promises to policy between organizations as one of the dramatically transform the way business is con- business collaboration challenges and apply ducted among organisations. Negotiation of game theory creatively on Business Collabora- common access to a set of resources reflects the tion aspect for decision making in terms of sharing preferences of the parties involved. Such improving performance. negotiations typically seek agreement on a set of access properties. The approach of this project would be making Game Theory has been an important theory in our assumption about the business collabora- several areas such as Mathematics, Economics tion first and then analyse the game theory and Philosophy because Game theoretic concepts characteristics. Then, we compare the business apply whenever the actions of any individuals, challenge to the game theory characteristics to form the result. groups, firms are interdependent. Also, it helps them to choose a better strategy to maximise The of this project would be a match their payoffs in terms of quality or profit. In result which mapped a classified business col- terms of business collaboration, we could apply laboration problem model with a game theory game theory to model the business collaboration model. situation such that we can find out a better strate- gy for decision making. 1 Introduction Therefore, the aim of this project is to investi- gate how Game Theory can be applied to Busi- Nowadays, a simple business process involves ness Collaboration aspect for decision making in multiple business partners – customers, dealers, terms of maximising profit or improving perfor- sales representative and logistic company. On the mance. other hand, businesses are increasingly outsourc- In this workshop paper it is constructed as fol- ing key operations and interacting with ever ex- lowings: in Section 2 and 3 are some related re- tending nets of partners. Since different players’ search about game theory and business collabo- decisions can have an effect on selecting the op- ration; Section 4 discusses the methodology how timal solution, the solution selecting process be- we solved the problem; Section 5 presents the comes complicated. analysis outcomes of the research and Section 6 A Business Collaboration is a set of roles inte- recommends the future work for this project. Fi- racting through a set of choreographed Business nally, Section 7 concludes the paper. Processes. Due to lack of trust, policy of access is required for ensure security between organisa- 2 Business Collaboration tions. The access control policy of a single orga- nisation or service is defined in terms of roles A Business Collaboration is a set of roles inte- racting through a set of choreographed Business Transactions by exchanging Business Docu- Also, it has to be consistency which is the ments. A Business Collaboration is defined by requirement of collaboration. Consistency also the parties in the collaboration; it can be simple needs support from other business transaction or complex, it can include expected and unex- requirements, such as atomicity, isolation and pected actions and the collaboration can allow time constraint to guarantee the consistency in for other than e-Business options. It is about the individual organization as well as the whole capability to transition to human interactions or business collaboration. (Sun, 2007) decisions that may be important to e-Business activity, e.g. a phone call. A business activity 2.3 Challenges in Business Collaboration consists of regular collaborative work among Trust is one of the major challenges in busi- participants to achieve a business objective. An ness collaboration. Many studies have shown that activity structure is a digital schema-based repre- the impediment to online payment is the lack of sentation that describes the properties of a busi- trust in E-business. (Yang et al, 2006) ness activity and that semantically relates it to Current standards in business collaboration the people, artifacts, tools, and events involved in design, due to their pre-defined and inflexible carrying out the business activity. There are also nature, are precluded from accommodating busi- relationships between interacting activity struc- ness dynamics. The challenge is thus to provide a tures. solution in which business collaboration devel- opment can be done in a flexible and adaptive 2.1 Business Collaboration Overview manner. (Fensel, 2001) The first dimension is collaboration aspects Buyers will need to maintain established long- which place emphasis on the different behaviors term relationships with preferred suppliers. of an enterprise in business collaboration: Therefore, a variety of business models are likely to continue to be viable in the marketplace. (Sun, • Before seeking partners to cooperate 2007) with an enterprise will first need to capture The models where the principal faces hidden its private behavior in the internal business action. These types of models are known as mor- process aspect. (Swaminathan and Tayur, al hazard models. Consider a small firm selling 2002) specialized medical equipment via a sales force, • Based on its internal behavior the enter- which currently consists of a single salesman. prise can then specify its capabilities in its The salesman (agent) represents the firm owner externally visible behavior in the partici- (principal) to the clients. The total amount of pant public behavior aspect. (Decker, sales, and hence, the firm’s revenues, depend on 2006) the efforts of the salesman. If the salesman does not work hard, the sales volumes from the new • Enterprise negotiates with other parties contracts are low, or potential customers are lost to establish cooperation. (Orriens et al, to competitors. Thus, the firm owner would like 2006; Orriens, 2006) to design a contract and offer it to the salesman 2.2 Business Collaboration Characteristics with the goal of providing an incentive to the salesman to work hard, such that both parties will The business collaboration characteristics are: mutually benefit. This situation is an example of • Long-time execution. the principal-agent problem. (Axelsson et al, 2002) • Heterogeneous and autonomous business All of the papers contain a clear discussion process communication among multiple about the business collaboration behavior, cha- business participants. (Axelsson et al, racteristics and challenges. However, there is no 2002) relevant work solving the problem with game • cross-organisational asynchronous busi- theory. ness interaction. (Joines et al, 2001) 3 Game Theory • Complex business-oriented transactional semantics. A mathematical theory, developed by J. von Neumann (1903-57) and O. Morgenstern (1902- • Cross-organisational transaction policy 77) in 1944, concerned with predicting the out- coordination. come of games of strategy. 3.1 Game Theory characteristics which any cooperation is enforceable by an out- side party. The Algorithm Game Theory (Nisan et al, Repeated: When players interact by playing a 2007) talk about the usefulness of game theory in similar stage game numerous times, the game is situations arising on the Internet. This is the called a . foundation reading for the project because it cov- : It is a class of games ers most of the Game Theory terminologies. with multiple pure strategy Nash equilibria in It identifies some main terms: which players choose the same or corresponding Player: Any participant in a game who has a strategies. nontrivial set of strategies and selects among the Also, Game theory is believed to give an op- strategies based on payoffs. timal decision in order to gain maximum profit in Payoffs: In any game, payoffs are numbers terms of business. Perng (Perng et al, 2007) which represent the motivations of players. In all made an argument that Game Theory reveals an cases, the payoffs must reflect the motivations of attractive profit increase for formwork subcon- the particular player. tractors joining a coalition. Strategy: A strategy defines a set of moves or actions a player will follow in a given game. A 3.2 Game Theory Models strategy must be complete, defining an action in every contingency, including those that may not In Andrea’s research, (Schalk, 2003) it stated be attainable in equilibrium. For example, a that Game theory assumes that a player evaluates strategy for the game of checkers would define a various outcomes in terms of the utility derived player's move at every possible position attaina- from them. There are two key points in a co- ble during a game. Such moves may be random, operative game: in the case of mixed strategies. (Webb, 2007) • What is the payoff for each coalition? Game: A situation in which a conflict arises between two or more players. • What payoff each player in the coalition : Nash equilibrium is a set should get? of strategies which represents mutual best res- The benefits acquired by the different mem- ponses to the other strategies. In other words, if bers of the various coalitions are different. Con- every player is playing their part of Nash equili- sistent with the definition of co-operative games, brium, no player has an incentive to unilaterally if the profit gained by a co-operating player ex- change his or her strategy. Considering only situ- ceeds that which would be gained when acting ations where players play a single strategy with- independently, that player will certainly seek to out randomizing a game can have any number of establish a coalition. The method adopted for Nash equilibria. (Stengel, 2008) allocating benefits and costs among the members : game is one of com- will affect the willingness of various members to plete information if all factors of the game are remain active in the coalition. The allocation . Specifically, each player is problem may be solved in a variety of ways, but aware of all other players, the timing of the an allocation rule that prescribes, somehow, a game, and the set of strategies and payoffs for solution for the allocation problem should satisfy each player. desirable criteria such as efficiency, fairness and Sequential: A is one in others. (Schalk, 2003) which players make decisions following a certain On the other hand, Mahesh Nagarajan and predefined order, and in which at least some Greys Sosic also made a strong argument about players can observe the moves of players who applications of to preceded them. If no players observe the moves supply chain management. Special emphasis is of previous players, then the game is simultane- placed on two important aspects of cooperative ous. games: profit allocation and stability. (Nagarajan Zero Sum: All outcomes involve a sum of all and Sosic, 2006) player's payoffs of 0. Cooperative: A cooperative game is one in which players are able to make enforceable con- 3.3 Game Theory in Business Application tracts. Hence, it is not defined as games in which Hu, Yu and Huang have discussed the applica- players actually do cooperate, but as games in tions of both Nash equilibrium of dynamic game and bargaining game theory to Collaboration Planning Model respectively. The possibility and • Each decision maker ("PLAYER“) has feasibility of attaining the goal of win-win and available to him two or more well- the conditions required are discussed for the co- specified choices or sequences of choices. operative enterprises of upstream and down- • stream in Supply Chain Management. The simu- Every possible combination of plays lation results verified the effectiveness of the available to the players leads to a well- model and algorithm. (Zhu et al, 2005) Moreo- defined end-state that terminates the game. ver, the collaboration planning model is estab- • A specified payoff for each player is as- lished by negotiation instead of automated nego- sociated with each end-state. tiation. Again, Mahesh Nagarajan, Greys Sosic also • Each decision maker does not have per- did a research with Supply Chain. They de- fect knowledge of the game and of his op- scribed the construction of the set of feasible position; that is, he does not know in full outcomes in commonly seen supply chain mod- detail the rules of the game as well as the els, and then used models payoffs of all other players. to find allocations of the profit pie between • All decision makers are rational; that is, supply chain partners. A few models including each player, given two alternatives, will negotiation model were analyzed and surveyed, select the one that yields him the greater and included suppliers selling to competing re- payoff. tailers, and assemblers negotiating with compo- nent manufacturers selling complementary com- First, we used the characteristics from section ponents. Then they discussed the issue of coali- 2.1 to analyse the negotiation of access control tion formation among supply chain partners. policy situation. (Nagarajan and Sosic, 2006) However, they did We have 7 classification criteria. not consider a repeated game which extended • Players: How many players will be in their model to an arbitrary number of players and this negotiation policy game? The answer a repeated game. could be zero, two or more than two. Ken Binmori and Nir Vulkan (1997) pointed out that: • Strategy: In a game each player chooses from a set of possible actions, known as • For some protocols, the system itself can strategies. In this situation would be ac- choose equilibrium in an unproblematic cepting the policy or denying the policy. manner. • Nash Equilibrium: It has a mutual best • When the choice of an equilibrium selec- response to the other strategies. tion norm would itself give rise to bargain- ing problems among the players, the equi- • Sequential: One player performs her/his librium refinement theories of game theory actions after another is a sequential game. can be given new life. Therefore, they • Complete information: If it is a sequen- have a non controversial means of inter- tial game and every player knows the preting the counterfactuals involved when strategies chosen by the players who pre- observing that optimizing players stay on ceded them. the equilibrium path in a game. • Zero Sum: One gain is the loss of the • Where analytic approaches fail, algo- others. rithmic methods for computing fix points corresponding to equilibria can be realisti- • Repeated: players play the game numer- cally employed. ous times. After we went through all these questions, we 4 Methodology found out the game type of business collabora- Before the analysis, we have made some as- tion challenge. sumptions: Then, we compare to the analysis for the games of Game Theory. (See Table 1)

Game Players Strategies per player Sequential Complete information Zero sum

Cake cutting infinite infinite No Yes Yes

Coordination game N variable No No No

Diner's dilemma N 2 No No No

El Farol bar N 2 No No No Guess 2/3 of the N infinite No No Yes average Minority Game N 2 No No No

Peace war game N variable Yes No No

Pirate game N infinite Yes Yes Yes

Screening game N variable Yes No No

Signaling game N variable Yes No No Table 1. Game Model Analysis

5 Result participant depend on the other participants’ ac- tions. After the analysis, we have the result that ne- This paper has given an overview of game gotiation of access control policy is a non- theory and business collaboration. cooperative, n-person game with incomplete in- Also, it analysed some game models in game formation. theory and lastly we defined the access control First of all, it could be many different organi- policy is classified as a non-cooperative, n- sations request for the access of the specific ser- person game with incomplete information and it vice. Therefore, it is a n-person game which can has the same characteristics as coordination have many requester to play this negotiation game. game at the same time. Then, in our assumption, we said they do not have full knowledge about References the game which is an incomplete information. Since all requests are sent as individual, it is a Andrea Schalk. (2003). The Theory of Games and Game Models. Department of Computer, Science non-cooperative game. We found that the once University of Manchester. the negotiation is done, they may negotiation again in the future such that it is a sequential Bao-lin Zhu, Hai-bin Yu and Xiao-yuan Huang. game. (2005). Game theory-based study on collaboration Next, we compared it with our game model planning model for supply chain. In Proceedings of the 7th international Conference on Electronic analysis. It turns out there are a close match with Commerce (Xian, China, August 15 - 17, 2005). coordination game. ICEC '05, vol. 113. ACM, New York, NY, :365- 369. 6 Future Work Bart Orriens and Jian Yang and Mike Papazoglou. We believe that using the strategy from Game (2006). A Rule Driven Approach for Developing Theory to solve the business collaboration chal- Adaptive Service Oriented Business Collaboration. lenge could bring a significant improvement. The In Proceedings of the IEEE international Confe- future work would be investigating the strategy rence on Services Computing [2006] :182-189. for coordination game and then model it in a ma- IEEE Computer Society, Washington, DC. thematical fashion such that we can use formula Bart Orriens. (2006). Modeling The Business Collabo- to produce experiment. ration Context, INFOLAB. Technical Report Se- ries, No. 28, Tilburg, The Netherlands. 7 Conclusion Bernhard von Stengel. (2008). Game Theory Basics. Game theory helps us model, analyse, and un- Department of Mathematics, London School of Economics. derstand the behaviour of multiple self-interested agents who interact while making their decisions. Dieter Fensel. (2001). Challenges in content man- Most business situations can be modeled by a agement for B2B electronic commerce, Proceed- “game,” since in any business interaction involv- ings of Second International Workshop on User In- ing two or more participants the payoffs of each terfaces to Data Intensive Systems : 2–4. Gero Decker. (2006). Process Choreographies in Ser- vice-oriented Environments, Hasso-Plattner- Institute, Potsdam, Germany. Haiyang Sun. (2007). A Framework for Managing Consistent Collaborative Business Transactions. Department of Computing, Macquarie University. Hong-tao Yang, Chun-sheng Shi and Wen-zhe Zhao. (2006). Analysis of Game Theory on "Online Transaction, Offline Payment" in B2B Based on the Context of Chinese "Guan Xi" Culture . James Webb. (2007). Game Theory: Decisions, Inte- ractions and Evolution. Springer Verlag, London. Jayashankar Swaminathan and Sridhar Tayur (2002). Models for supply chains in e-business. Manage- ment Science. volume 49 (10) :1387-1406. Jeffrey Joines, Shu-Cherng Fang, Russell King and Henry Nuttle. (2001). Business-to-Business Colla- boration in a Softgoods E-Supply Chain. National Textile Center Annual Report. Karin Axelsson, Ulf Melin and Göran Goldkuhl (2002) Understanding B2B interaction – A model to accentuate interorganisational system design is- sues. ECIS conference, Poland. Ken Binmore and Nir Vulkan. (1997). Applying Game Theory to Automated Negotiation. Rutgers Univer- sity, New Brunswick, NJ. Mahesh Nagarajan and Greys Sosic. (2008). Game- theoretic analysis of cooperation among supply chain agents: Review and extensions, European Journal of Operational Research, volume 187, Is- sue 3. : 719-745 Noam Nisan, Tim Roughgarden, Eva Tardos and Vi- jay Vazirani. (2007). Algorithmic Game Theory. Cambridge University Press. Yeng-Horng Perng, Shu-Ju Chen and Hui-Jung Lu. 2005. Potential benefits for collaborating form- work subcontractors based on co-operative game theory. Building and Environment, 40:239–244.