Literary ReviewGame Theory has become one of the most powerful analytical tools in microeconomics. Game theory has many application, one of which is to offer prediction, describe prescriptions and recommendation for decision makers especially in an oligopoly market structure. We will use game theory to show how business situation can be modelled as a game and how payoff of one player depends on the other player’s action in the business framework. In business application, Game theory can be used in three context-1) Intra-organizational games, which are played within the firm, 2) Inter-organizational games, where main players are a firm and its competitors,3) Meta-organizational games, where main players are a social planner and an innovative entrepreneur. (1)

We would confine our research to inter-organizational games specifically the business decision of large corporations. The most popular topic in Game theory analysis is what kind of innovation strategy (cooperative, imitative, non-cooperative) should it choose when such activities depend on firms own condition and its market status in the industry. (1)

Game theory offers methods and concepts such as strategies and equilibrium which provide useful insights in various business situations and help decision makers understand the dynamics in business interactions and lead to higher quality and more informed decisions.

There are various research papers which has used game theory as the tool to solve and analyse crises, conflicts, prevent and detect frauds, environmental problems, automated negotiation etc. It especially does optimization of all the existing options and helps to select the best possible solution even in the worst situation. One of the best example used in previous research paper for the crisis solution using game theory is to provide a substantiating view on the crisis started in 2007, whose consequences transcended around the world recession. The paper is based on a static game theory along with the limits of classic finance theory to provide satisfactory explanations of different financial events. The aim was to analyse two cases of application of the game theory in the financial intermediation, with the impact on crisis. The proposed games correspond to deposits and loans. The end of the game managed to the idea that balance is reached only when the players, both deponent and borrower will withdraw money from the bank together.

In one of the research finding, it had been shown how game theory can be used in programming automated agents within the Advance Decision Environment for Process Tasks project, used by most of the telecom company in some of crucial processes. It showed a concept of artificial agent that acted independently for its user’s interest and its advantage over the personal agents. An artificial agent could remove some of serious negotiation which crank the problem up several notches.

Game theory could be very helpful in identifying improvements in audit practice and promising areas for future research. It is the best analytical method that incorporate strategic interdependence, which needs to predict behaviour based on a player’s motivations as well as the anticipated actions of the opponent. Although research suggest that audit standards and practice aids inhibit this

process, experienced auditors often consider the strategic implication of fraud in their audit plans. Understandings the boundaries of game theory is important for determining how audit standards might facilitate auditor’s consideration of strategic behaviour. For example, predicting an auditee’s response to anticipated auditor behaviour is very difficult.

One of the researchists studies prediction explain how the solution and situation defined using game theory is truly applicable to Iraqi conflict. His article represented the first known effort to apply the game-theory concepts of “Parento improved” and “Parento optimal” strategies as well as “Nash” and “preferred” equilibriums to the Iraqi conflict. Using the game theory, the article examined how US and coalition forces would ultimately suffer causalities at an increasing rate the longer they remain in Iraq.

Our research considers the implicit similarities between the situation of new market entrant and the prisoner’s dilemma framework. It is important to know how the new market entrant understands the processes that promotion of cooperation between the existing market players and them. In prisoner’s dilemma, two suspects of a crime are kept in different cells with no means of contact with each other. The police does not have any evidence against the suspects so they play a game with them. The prosecutor tell each one of the suspects separately the following points:

1) If you confess and agree to testify against the other suspect, the charges against you will be dropped and you will go scot-free.

2) If you do not confess but the other suspect does, you will be convicted and the prosecution will seek the maximum sentence of three years.

3) If both of you confess, you will both be sentenced to two years in prison.

4) If neither of you confess, you will both be charged with misdemeanours and will be sentenced to one year in prison.

As the above example shows that result is worse when each suspect follows his own self-interest than if they had both cooperated. When both of them cooperates and stay silent, both would get a total prison sentence of 2 years. While in all other outcomes, they would get three to four years of sentence. The same case follows in oligopoly market structure where a firm who is only interested in getting the maximum benefit for himself or herself would generally prefer to defect, rather than cooperate. This dilemma, where the incentive to not cooperate is so robust even though cooperation may produce the best results, plays out in numerous ways in business and the economy, as discussed below.

Analysing the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream market reveals that for some levels of asymmetry, the incumbents face a prisoners’ dilemma with respect to conceding access to their bottleneck inputs.

In our research work, we will also be discussing the entry barriers and strategies counteracting the same for the new market entrant. The potential demand in a new market evolve overtime. Initially, demand is low but with the advertising by early entrant of the industry can speed up demand growth. Firm’s entry strategy is also influenced by the transition of economic states. Firms are more likely to enter under a state that shows the prospect of demand taking off soon.

The previous researches show that markets with high advertising-to-sales ratios have significantly lower entry rates than markets with low advertising-to-sales ratios. This supports the hypothesis that service differentiation barriers do indeed reduce entry rates in e-commerce market. Entry rates apparently are not dependent upon market concentration. The results indicate that entry rates have no impact on exit rates and vice versa.

Another research shows that there are two factors affecting entry and exit factors of a corporation namely multiplier effect and competition effect .The research analyzed data from 25 firms and came to the conclusion that competition effect is larger than multiplier effect in terms of the entry factor.Competition effect is the predominant force for patterns of exit as earlier entry forces the incumbent firm to exit whereas previous exit make it a lot easier for incumbent forces to survive. (1-M)

A new competitive landscape is developing largely based on the technological revolution and increasing globalization. The strategic discontinuities encountered by firms are transforming the nature of competition. To navigate effectively in this new competitive landscape, to build and maintain competitive advantage, requires a new type of organization. Success in the 21st century organization will depend first on building strategic flexibility. To develop strategic flexibility and competitive advantage, requires exercising leadership, building dynamic core competencies, focusing on and developing human capital, effectively using new manufacturing and information technologies, employing valuable strategies. Thus, the new competitive landscape will require new types of organization and leaders for survival and global market leadership.

The results confirm that over a three-year period the rate of (net) entry is positively affected by the presence of ‘market room’. The exit rate, however, does not show a negative relation with ‘market room’.

Ecommerce firms are facing increased saturation in their respective home markets .To compensate for such saturation expanding the sales to new foreign countries is the way forward . The prospect of entering a new market can be challenging . Hence firms must develop individually designed stratergy tailor made for each market.Digital is changing the landscape of buisness rapidly, what is hot today might be cold tomorrow.New business models are in many ways changing the online retail game in profound ways.E-commerce companies are coming up with disruptive techniques like flash sales and deep discounts,social shopping in a bid to fend off competition.Thus it has become increasingly essential to employ techniques like game theory to get a competitive edge.

There has been a 50% growth in he last five years in the indian e commmerce industry.The approriate ecosystem is setting in place recently although ecommerce has been making rounds for the past two decades.The phenomenal increase in internet penetration , growing accessibilty of online payments are some of the key factors driving the growth for this industry.Hence such a market becomes the ideal hunting ground for corporations who wish to expand their maket and tap into its phenomenal growth.

Another reseach paper analyzes what is causing this phenomenal growth.Cash-on-delivery was considered a key factor besides the increased use of digital devices by the population at large.For e-commerce firms operating in india cash on delivery accounted for 50%-80% of the online retail sales.Firms have started adopting new models like stock and sell ,group buying which is also contributing to growth of this industry.

The research also suggests that firms are facing some scathing challeneges like inventory management ,location warehouses and in-house logistical capabilities.In a country like India where connectivity is still an issue location of warehouses has posed a serious bottleneck in their operations.The other factor that is affecting the location of the warehouse if non-uniform tax rate across states,multiple point taxation and octroi,entry tax.Luckily with reduced shipping costs the effect of this issue is decreased substantially but it still needs attention by the government in power.The industry expects that with the introduction of GST this issue would be resolved considerably.

Early entrants like online classified advertisements have also evolved to offer a plethora of services like buying and selling of vehicles to fining a babysitter. They now offer b2b ,b2c and c2c modes of commerce to its customers.The b2c e-commerce sector may be broadly classified as travel and non travel.Online travel booking is the largest b2c e-commerce segment accounting for approximately 81 % revenues in 2011.

Research indicates that India has a internet penetration of 11.4% compared to the 80% penetration that of developed countries.This indicates that the industry still has a lot of growth opputunity . This is supported by the fact that the government of India has included increased technology adoption as part of the National telecom policy 2011.

Payment landscape in India is undergoing a rapid change.The number of cards per capita in India is .2 which is the lowest in the world .Ecommerce firms have also raised concerns on the success rate in online transaction. With RBI giving licences to payment banks and with increased financial inclusion in the economy ,the current landscape is expected to change even more rapidly.

Laws regulating the ecommerce industry are still evolving and often lack clarity.This is posing a challenge for new entrants as well as exhisting players.Lack of lawyers specializing in this industry has addeded to the problem.

1.Interdependencies in the Dynamics of Firm Entry and Exit Kristina Nystro ̈m 2006

INDIAN E-COMMERCE INDUSTRY OUTLOOK 2017 - FAR REACHING OPPORTUNITIES IN B2B MARKETPLACESRebirth of e-Commerce in India by EY