Collaboration towards a goal


Collaboration is a process in which two or more people, organizations or countries work together towards a common goal.( Shapley, L.S. 1953) The elements required for collaboration can differ according to different fields for example in Sociology; collaboration requires leadership, although the form of leadership can be social leadership within a decentralized and egalitarian group. In particular, teams that work collaboratively can obtain greater resources, recognition and reward when facing competition for finite resources. Collaboration is not only positive but can also be negative like collaborating to oppose a goal exhibits adversarial collaboration, though this is not a common case for using the term.( Smith, et al, 1973) If the collaboration is more structured, encourage introspection of behavior and communication. These methods specifically aim to increase the success of teams as they engage in collaborative problem solving. Forms, rubrics, charts and graphs are useful in these situations to objectively document personal traits with the goal of improving performance in current and future projects. ( Smith, et al, 1973) During and after the Second World War the term "Collaboration" acquired a very negative meaning as referring to persons and groups which help a foreign occupier of their country-due to actual use by people in European countries who worked with and for the Nazi German occupiers. .( Shapley, L.S. 1953) If we talk linguistically, "collaboration" implies more or less equal partners who work together-which is obviously not the case when one party is an army of occupation and the other are people of the occupied country living under the power of this army.

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Collaboration in business is a very important aspect and can be found both inter- and intra-organization and ranges from partnership to the complexity of a multinational corporation. Collaboration between team members allows for better communication within the organization and throughout the supply chains. It is a way of coordinating different ideas from numerous people to generate a wide variety of knowledge ( Aumann, et al 1974). The recent improvement in technology has provided the world with high speed internet, wireless connection, and web-based collaboration tools like blogs, and wikis, and has as such created a "mass collaboration." People from all over the world are efficiently able to communicate and share ideas through the internet, or even conferences, without any geographical barriers.( Gintis, Herbert 2000)

"Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers" (Harland, 1996). Supply Chain Management in general encompasses all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. The definition, given by American professional association, is that

"Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies."

Game theory is a branch of mathematics and is used in the social sciences, engineering, international relations among other.. Game theory gives a mathematical solution in a strategic situations, here the individual's success in making a certain choices depends on the choices of others. Game theory has now been broadened to treat a wide class of interactions, which are classified according to several criteria. Now a days "game theory is a sort of umbrella or 'unified field' theory for the rational side of social science, where 'social' is interpreted broadly, to include human as well as non-human players (computers, animals, plants)" (Aumann 1987). Traditionally game theory attempt to find equilibrium in these games. In an equilibrium position, each player of the game has adopted a strategy that they are unlikely to change. Many equilibrium concepts have been developed and the most famous among them is one given by the Nash equilibrium. (Dutta, Prajit., 1999) The very equilibrium concepts are influenced by the condition of the field of application. Although this methodology is also not without its flaws, It has been often debated over the correctness of particular equilibrium concepts, the appropriateness of equilibrium altogether, and the usefulness of mathematical models that are used. Now we would explore the origin of the game theory. The field of game theory came into being with the 1944 book "Theory of Games and Economic Behavior" which was written by John von Neumann and Oskar Morgenstern.( Fernandez, Bierman, 1998) This theory was further developed by many scholars in the 1950s. Game theory has been widely recognized as an important tool in many fields and to judge its importance consider that eight game theorists have won Nobel prizes in economics. Although there are various kinds of games depending on the situation but we would concentrate on zero sum games and non zero sum games. Zero-sum games are a constant-sum games, in which whatever the choice players make can neither increase nor decrease the available resources. In zero-sum games the total benefit to all players in the game, for every combination of strategies, always adds to zero an excellent example of such a situation can be Poker, because one wins exactly the amount one's opponents lose.(Myerson, Roger, 1997) Many games studied by game theorists including the famous prisoner's dilemma are non-zero-sum games, because some outcomes have net results greater or less than zero. Typically zero sum game cannot be judged as a win-win situation as one party has to lose here. Informally, in non-zero-sum games, a gain by one player does not necessarily correspond with a loss by another. Constant-sum games correspond to activities like theft and gambling, but not to the fundamental economic situation in which there are potential gains from trade.( Edgeworth, Francis, 1981). It is possible to transform any game into a (possibly asymmetric) zero-sum game by adding an additional dummy player (often called "the board"), whose losses compensate the players' net winnings.( Robert Gibbons, 2001) To better analyze and critically evaluate and to see if win-win situation really exists let us examine few situations:

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Absolute advantage: The concept of absolute advantage was developed by Adam Smith. Famous economist Paul Craig Roberts had noted that the principles of comparative advantage as developed by David Ricardo is not valid when the factors of production are internationally mobile. Also another limitation to the theory exists if there is single kind of utility.( Fudenberg, Drew; Tirole, Jean 1991) As people in general want food and shelter this indicates that multiple utilities are present in human desire. The very second, the model goes from one good, to multiple goods, the absolute may turn to a comparative advantage.( Rasmusen, Eric, 2006) However, global labor arbitrage, where one country exploits the cheap labor of another, would be a case of absolute advantage that is not mutually beneficial. Generally, in international trade, countries export goods and services for which they have an absolute advantage in and import goods and services in which another country has the absolute advantage.( Leyton-Brown et al, 2008) According to the theory of absolute advantage, a country that has no absolute advantage in any product or service, then no trade will occur.( Miller, James, 2003) The two concepts have applications outside international trade, though this is where they are most commonly used. Suppose that two castaways on a desert island gather both fruit and grain, which they then share equally between them. Suppose that Castaway A can gather more fruit per hour than Castaway B, and therefore has an absolute advantage in this good. Nonetheless, it may well make sense for A to leave some fruit-gathering to B. This is because it is possible that B gathers fruit slightly slower than A, but gathers grain extremely slowly (Osborne, Martin, 2004). One needs to look at comparative advantage rather than absolute advantage, to discover how A and B can each best allocate their effort. If A's initial advantage over B in grain-gathering is greater than his or her advantage in fruit-gathering, then fruit-effort should be transferred from A to B, to the point where A's comparative advantages in the two goods are equal. Thus it may be rational for fruit to flow from B to A, despite A's absolute advantage. (Osborne, Martin, 2004)

Generally in economics the term absolute advantage refers to the ability of a party, individual, firm, or country to produce more of a good or service than their competitors, using the same amount of resources. Also as absolute advantage is generally determined by a comparison of labor productivities, hence it is possible for a party, individual, firm, or country to have no absolute advantage. (Luce and et al 1957)

Supply chain management is a very important aspect of the concept of absolute advantage as better supply chain management helps a party, individual, firm, or country in reducing the overall product cost. A perfect example can be case of various firms in Japan using the concept of JIT's (Just In Time) concept of supply chain management. Absolute advantage can be perfect example of win-win situation, a party, individual, firm, or country having absolute advantage can deal with a buyer, here both buyer and supplier are in win-win situation, supplier is better placed in the market and the buyer can get the same product at a cheaper rate.


Next we would examine comparative advantage. Absolute advantage can be seen some time as not a typical case of win-win situation but comparative advantage can in no doubt be pitched as a case where all the parties involved clearly emerge as winner.

Comparative advantage was originally described by Robert Torrens in 1815. He described comparative analysis in an essay on the Corn Laws, in this essay Robert argued that it was to England's advantage to trade with Portugal in return for grain, even though it might be possible to produce that grain more cheaply in England than Portugal. (Vincent et al 2007)However the term comparative advantage is usually attributed to David Ricardo who used it in his book "On the Principles of Political Economy and Taxation" in 1817, he used an example involving England and Portugal. In his book he argued that (David Ricardo, 1817)

"In Portugal it is possible to produce both wine and cloth with less labor than it would take to produce the same quantities in England. However the relative costs of producing those two goods are different in the two countries. In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce. Therefore while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely England benefits from this trade because its cost for producing cloth has not changed but it can now get wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each country can gain by specializing in the good that it has comparative advantage in and trading that good for the other."

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When taking in economics terminology, comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal cost and opportunity cost than another person or country. Comparative advantage is the special ability to produce a product or service most efficiently and in most economical manner given all the other products or service that could be produced or provided. It can be contrasted with absolute advantage which refers to the ability of a person or a country to produce a particular good or service at a lower absolute cost than another. Comparative advantage explains how trade can create value for both parties even when one can produce all goods with fewer resources than the other. (Vincent et al 2007). If we talk about long term win-win collaboration in light of the comparative advantage then we would see how it is possible to forge such a relationship. We would again take the example of Portugal and England given by David Ricardo in his book "On the Principles of Political Economy and Taxation" in 1817, given above. Now suppose Portugal and England enters into long-term relationship, England stops producing wine and Portugal stops producing cloth all together, with this understanding both the countries would benefit. England would now start getting cheap wine and Portugal would get cheap cloth. Hence this is a win-win situation for both countries.

Next we would see how some more long term collaboration can turn into win-win situation for the involved parties.

Now a day's we hear a lot about Free trade. Free trade is a trade policy that allows traders to trade and transact without interference from the local government. Free trade policy is applicable where there is a comparative advantage; hence under the law of comparative advantage the policy permits trading partners mutual gains from trade of goods and services.

Free trade policy gives a clear reflection of supply and demand in the market, also free trade ensures best allocation of resources. Free trade differs from other forms of trade policy where the allocation of goods and services amongst trading countries are determined by artificial prices that do not reflect the true nature of supply and demand. These artificial prices are the result of protectionist trade policies generally adopted by the local goverment; here governments intervene in the market through price adjustments in form of subsidies and supply restrictions in form of duties. Such government interventions generally increase the cost of goods and services to both consumers and producers. Interventions include subsidies, taxes and tariffs, non-tariff barriers, such as regulatory legislation and quotas, and even inter-government managed trade agreements such as the North American Free Trade Agreement (NAFTA) and Central America Free Trade Agreement (CAFTA) (contrary to their formal titles) and any governmental market intervention resulting in artificial prices that do not reflect the principles of supply and demand. But this is an idealist situation, in the real world most states conduct trade polices that are to a lesser or greater degree protectionist. (Aumann 1987). One ubiquitous protectionist policy employed by states comes in the form agricultural subsidies whereby countries attempt to protect their agricultural industries from outside competition by creating artificial low prices for their agricultural goods. But even then free trade policy is win-win situation for all the parties involved, for manufacturers it opens new market, for suppliers it opens new manufacturers, for customers free trade policy ensures cheap goods and so on ( Fernandez, Bierman, 1998). Hence long term relationship between two countries can produce a win-win situation.

Next we would again see a form of trade which would reflect a win-win situation. "Gains trade" in economics refers to net benefits to agents from voluntary trading with each other. It is commonly described as resulting from: (Myerson, Roger, 1997)

1. Expertise in production from division of labor, economies of scale, and relative availability of factor resources and in types of output by farms, businesses, location, and economies. 2. A resulting increase in total output possibilities. 3. Trade through markets from sale of one type of output for other, more highly valued goods.

They have a low opportunity cost as they are able to attract factors of production, including labor, into activities according to comparative advantage which are reflected in prices of outputs and inputs. The beneficiary party that is factor owners then uses their increased income from such savings due to specialization to buy more-valued goods of which otherwise be high-cost producers, hence their gains from trade. (Duncan et al 1989). According to Martin J. Osborne "A measure of total gains from trade is the sum of consumer surplus and producer profits or, more roughly, the increased output from specialization in production with resulting trade. Gains from trade may also refer to net benefits to a country from lowering barriers to trade such as tariffs on imports."

From publication of Adam Smith's Wealth of Nations in 1776, it has been widely argued, that, from competition and absent market distortions, gains are positive in moving toward free trade and away from no trade or prohibitively high import tariffs. Rigorous early statements of the conditions under which this proposition holds are found in Samuelson in 1939 and 1962. For the analytically tractable general case of Arrow-Debreu goods, formal proofs came in 1972 for determining the condition of no losers in moving from no trade toward free trade (Green, et al 1995). From above argument it should not inferred that no tariff is the best option as it would not create an ideal win-win situation, rather, a large economy might be able to set taxes and subsidies to its benefit. Hence we have seen there are various win-win situations that are already excising or can be formed. Collaboration if done in a positive manner can actually deliver situations which are favorable to all the parties involved.


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