Strategic Behaviour in Network Industries

Strategic Behaviour in Network Industries

A Multidisciplinary Approach

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

This in-depth book explains how institutional changes such as the privatization and liberalization of network industries, for example transport, energy or telecommunications, can frequently be disappointing. The expected benefits such as lower prices, innovation and better services fail to materialize, often because the number of competitors is low. The authors demonstrate how strategic actor behaviour of one or more of the firms involved can help explain these disappointing results.

Chapter 2: Defining Strategic Behaviour

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

Subjects: business and management, organisational behaviour, economics and finance, game theory, institutional economics, public sector economics


THE CONCEPT ‘STRATEGIC BEHAVIOUR’ Strategic behaviour is a frequently used concept. Sometimes authors refer to strategic behaviour when they attempt to explain why the results of institutional changes such as privatization and liberalization can be so disappointing. Expected positive effects such as lower prices, innovation and better services fail to materialize. The number of competitors in network industries is usually low. Consequently, one of the explanations given in such cases is ‘strategic actor behaviour’ of one or more of the players involved. In such cases, the concept ‘strategic behaviour’ is used comparatively loosely and associatively, without defining it clearly or separating it from other modes of behaviour. However, in spite of this lack of clarity it appears to be a socially and scientifically relevant phenomenon. Within the academic world, economists make the most rigorous use of the concept, calling it either strategic behaviour or opportunistic behaviour, and often do so in a stylized manner. Although academically rigorous, economic publications often restrict themselves to analytical descriptions of fictitious situations or stylized, generic interpretations of real-life situations (Hurwicz and Reiter, 2006; Dixit and Nalebuff, 1993; Kreps, 1990). This is a very good starting point, but not complete for our purposes. Since this book attempts to get much closer to ‘what happens on the ground’ and to actually see what strategic behaviour means in practice and how it evolves, we will depart from the economic ‘rational choice’ game-theoretic notions and then systematically expand on those and add characteristics to develop the concept towards...

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