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Value capture in hierarchically organized value chains
Author(s) -
Henkel Joachim,
Hoffmann Alexander
Publication year - 2018
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12278
Subject(s) - shapley value , complementarity (molecular biology) , negotiation , value (mathematics) , core (optical fiber) , microeconomics , value capture , cooperative game theory , distribution (mathematics) , mathematical economics , economics , industrial organization , game theory , computer science , value creation , mathematics , telecommunications , mathematical analysis , genetics , political science , law , biology , machine learning
We study how the structure of negotiations in a value chain affects the distribution of value among its members. To this end, we generalize the Shapley value and the core to hierarchical bargaining situations. While the core yields no concrete predictions, the Shapley value analysis suggests that positions most conducive to value capture are those that allow to realize large complementarity gains. If the game exhibits “supercomplementarity,” then it is advantageous if a firm's negotiation partners are grouped into clusters. Using examples from the aircraft and white goods industries, we assess whether the firms’ actions are consistent with model predictions.