An Application of Behavioral Game Theory in Equilibrium Analysis of Concurrent Product-Development Projects

This paper analyzes design equilibrium in a concurrent product-development project using the results from behavioral game theory. In this study, a project consists of a team of three engineers who represent three product-development stages: product design, material selection, and process selection. Product-development tasks are globally distributed, and engineers are allowed to independently make product-development decisions (i.e., non-cooperative design). In addition, the engineers are evaluated according to the outcomes of both individual and team product-development tasks. When multiple design equilibria exist, but a dominant design equilibrium does not, the past behavioral-game-theory studies indicate that design equilibrium may be reached under two conditions. In the first condition, one engineer is allowed to announce his/her intended alternative even though he/she does not need to actually choose the announced alternative. In the second condition, one engineer is selected to make his/her choice first but the other engineers do not know what that choice is. Sensitivity analysis indicates that a wide variety of design equilibria will emerge depending on how engineers are evaluated.