Analysis of Geoinformation Pricing Using Game Theory

Alenka Krek (2005): Analysis of Geoinformation Pricing Using Game Theory In: 8th AGILE Conference on GIScience, May 2005, Estoril, Portugal

Game theory is a theory of decision-making and models dynamic and flexible economic relationships. In this paper we demonstrate how it can be implemented in a geoinformation trade situation. We set up a business game model where two producers of geoinformation produce and sell their products. The producers are rational in the sense that they are trying to maximize their profits, and they can set either a high or a low price for their geoinformation products. We focus on the implementation of different pricing strategies and show the resulting payoffs in the form of the profits gained by the geoinformation producers. According to our analysis, setting a low price is a strictly dominant strategy. A dominant strategy is the best choice for a player for every possible choice of the other player. We conclude the paper with a discussion of the analysis results and suggestions for further research.

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