The Two Sides of Competition and Their Implications for Strategy

Michael D. Ryall, University of Melobourne
Joshua S. Gans, University of Melobourne
Glenn MacDonald, Washington University

Abstract

We analyze value appropriation under competition using cooperative game theory and demonstrate that competition embodies two competing rivalries: to appropriate value on the one hand and to create it on the other. The management of this tension is central to strategy. We present a new notion of competitive intensity, show where the traditional view of competition leads one astray and introduce a new quantitative method by which practitioners may assess their strategic options.