An analysis of firms' sustainable operations strategies: a game theory approach

Environmental sustainability is receiving increasing attention in industries and is manifested in various dimensions such as marketing and operations. Incorporating sustainability in operations is a strategic decision that has challenged most firms in recent years. Social trends and government regulations are important factors that play a role in influencing firms' decisions to adopt an environmentally sustainable strategy in their operations. In this paper, we develop a game theory model to mathematically analyse how these two factors can change a firm's decision from a non-sustainable to a sustainable strategy, and vice versa. We demonstrate that the model is not limited to the 'prisoner's dilemma' but also includes the games of 'harmony' and 'no-conflict'. This model helps explain firms' past sustainability behaviour and enables us to predict their future actions.