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The Western Mining Corporation–Hanna/Homestake Joint Venture: Game Theory and Inter–Organizational Cooperation
Author(s) -
Boyce Gordon
Publication year - 1997
Publication title -
australian economic history review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.493
H-Index - 16
eISSN - 1467-8446
pISSN - 0004-8992
DOI - 10.1111/aehr.373003
Subject(s) - joint venture , corporation , joint (building) , dilemma , game theory , economics , business , management , industrial organization , engineering , microeconomics , commerce , finance , civil engineering , philosophy , epistemology
In 1962, Western Mining Corporation along with M. A. Hanna and the Homestake Mining Company formed a joint venture to explore and develop iron ore deposits in Western Australia. The partners successfully developed one ore field, but failed to build an enduring business relationship. The paper uses game theory to examine joint venture dynamics. It finds that the partners could not transform a Prisoners’ Dilemma scenario into a coordination game because they failed to establish effective communication methods and an appropriate balance between contractual specification and latitude for ex post adjustment. The case reveals additional factors – differences in the size, local presence, and substitution possibilities of the players – that should be incorporated into game theory.