ANALYSIS OF BEHAVIOUR OF AIRBUSAND BOEING COMPANIES FROM THE GAME THEORY PERSPECTIVESSUMMARYThe goalof this work is to look at Airbus and Boeing companies from the Game Theoryperspectives. That’s why; in this work, we are going to study that what Airbusand Boeing companies are and the analysis of behaviour of these companies fromthe point of view of Game Theory. The Game Theory with the most basicdefinition is to be able to explained the human behaviours through games. Invarious parts of business life and daily life, we can come across game theory.Leaders and managers should grasp the game theory and be able to successfullyenforce it in business processes. At this point, we are going to examine thathow we can associate Airbus and Boeing companies with game theory. Firsly, weare going to define Airbus and Boeing companies and what the Game Theory is andthen we are going to evaluate these two companies in terms of Game Theoryperspectives. ABOUT AIRBUSAirbusS.
A.S was established in 1970 as a French-German partnership. The company iscurrently grounded in Germany, France, Spain, the United Kingdom and theNetherlands. The center of it is in Toulouse in France.
Thesecountries are liable for manufacturing different parts and parts of thedifferent models manufactured. The A320 model, which includes the A318, A319,A320 and A321 models, is pieced together in Hamburg, Germany, while the othermodels are pieced together in France. The first aircraft to be produced is thea300-b series, and after extensive research, this model has developed and isnow the world’s largest passenger aircraft manufacturer.
The firstmodel to be manufactured is the A300, followed by A310, A320, A330, A340 andthe latest A380 respectively. The A350 XWB model is also made a design of and made available. ABOUT BOEING COMPANYBoeing,the world’s leading aviation and space company, is the world’s biggest airplaneproducer while both commercial and military airplane manufacture are apprisedtogether. Boeing also designs and produces helicopters, electronic and defensesystems, fuzzers, satellites, launch vehicles and advanced knowledge andtransmission systems. As one of NASA’s major service providers, Boeing is themajor contractor of the International Space Station. The company also offers anumber of military and commercial airline support services.
Boeing provides productand support services to cuntomers in 150 countries and is one of the biggestexporters of the United States (USA). Boeingowns a long custom of leadership and innovation in space and aerospace, andkeeps expanding its product range and services to satisfy showing up consumerwants. Boeing keeps expanding its range of products and services to satisfyaltering consumer requirement in thespace and aerospace sector, where it owns for many years been leading andinnovating.
Within the extensive ability of the enterprise; improving new andmore efficient members for commercial aircraft families, achieving integration networkplatforms, military platforms, security systems and combat aircraft,manufacturing high-tech settlements expanding to work units, providing aircraftwith electronic data transfer ability, communicating with mobile platforms andmanufacturing financial settlements for our consumers . DIFFERENCE BETWEEN AIRBUS ANDBOEING COMPANIES: THE CONTROL SYSTEMSWhilethe US media was locked in a deal for 260 flights between American Airlines andAirbus, the debate prompted the “Which company is better” question.Pilots say that the two most important differences between the two companiesare control systems. Airbus’s planes are managed by “wire-controlledflight”. This means that it is managed by joystick on board.
The Boeinghas a steering wheel. Pilots say that the Boeing system allows them to feelthat there are fewer electronic vehicles between them. In other words, thepilots compare the joystick control method to the video game. Anotherdifference between the two brands is security systems. The computers on Airbusdo not allow you to configure the pilot’s settings, which the car feels is indanger. Boeing gives more freedom to planes pilots.
WHAT IS GAME THEORYGametheory is a metaphor for statistical science, used in social sciences (mosteconomically), biology, engineering, political sciences, computer science(fundamentally artificial intelligence studies) and philosophy. Game theorytries to capture the mathematical behavior of some strategic circumstances thatthe person makes choices that his achievement relies on the choices of others.Even if it was originally improved to settle rivals where a person’s income isat the expenditure of the others (zero sum games), he has started studying abroad range of interaction, ground on many aspects. Today, “play theory isa ‘unified field’ theory or a type of umbrella for the rational aspect ofsocial sciences, which the ‘social’ term covers in large terms human andnon-human players (computers, animals and plants). Game theory started throughthe book Theory of Games and Economic Behavior written by John von Neumann andOskar Morgenstern within 1944.
This theory has been improved by many academicsin the 1950s. Even though similar improvements were going in the 1930s, biologywas applied in the 1970s. Many areashave been known as a significant tool.
In the economy, 8 game theorists havereceived the Nobel Prize, and John Maynard Smith has been rewarded the CrafoordPrize for his practice in biology. Thistheory plays a so significant role in the past, the future, the socialsciences, and is also used today in many different academic areas. At thebeginning of the 1970s, game theory was implemented to animal behavior,including evolutionary theory. He has took advantage from many acts,particularly the prisoner dilemma, to portray the considerations of politicalscience and ethics. In recent times, game theory, artificial intelligence, andcybernetics have been used to cope with the attention of computer science. THE ANALYSIS OF AIRBUS AND BOEINGCOMPANIES FROM THE POINT OF VIEW OF GAME THEORYSimplegame theory tools can take some ways to return to preduence.
Both Boeing andAirbus can manufacture a logical motivational order in spite of struggling withsuccessive amazing activities in the “super jumbo” game: Boeing, byHayhurst’s statement, played a psychological card in a game he knew that theycould not acquire. Atthe heart of the script, the Game Theory is a simple way to visualize investorideas within circumstances where the market is not able to sustain competitorinvestments. In the Game Theory, every player owns two options whether toinvest in improving a new product or not. If only one player decides to improve,that player is going to acquire significant earnings on market domination whichis going to be got in the future. Ifboth of two players decide to improve, it is probable to generate the productloss for both of them. If neither advances, the market is going to remainprofitable.
Airbus soon was doubtful of Boeing was not interested in takingirreversible undertakings. The reason for this was not that Boeing wanted torun with full dominance of the new market, but rather to use the more retardedtactics to preserve the monopoly of the over 400 seat old aircraft market.(Boeing’s 307-year-old 747 jumbo design has 420 passengers, the biggest Airbus,state-of-the-art A330, with only 330 capacity.) Accordingto this interpretation, Boeing was not caught in the Dilemma of the Developerin the first place, because a new market that was not used meant monopolyearning. (Boeing gains $ 45 million for each $ 150 million jumbo itmanufactures.) Airbus has even claimed that Boeing’s high jumbo sellings enableit to subsidize selling of mid-dimension jet.
From the perspective of gametheory, Boeing’s decision not to benefit the new market was negative, andAirbus’s earning was negative. Boeing’s greatest interest was to decelerate theimprovement of the alternative jets in over 400 categories, finishing Boeing’sjumbo monopoly of interest to Airbus. In 1995, Airbus decided to leave alone.The VLCT was abandoned.
Behind him was the A3XX Airbus for 550 passengers. Improvementcosts were estimated about $ 8 billion. Boeing objected, declaring a tautdouble-deck jumbo carrying 600 passengers through an improvement cost of only $2 billion. In terms of game theory, Boeing’s response should be viewed as athreat by altering Airbus’s potential earning to improve an alternative 400-plusseater: If you keep over Airbus, we will use you to reduce you (Boeing) usingour available designs. At the end, however, the threat was called a try-on. Twoairline companies did ground on the most crowded airports and taking intoconsideration adding a bigger car to their squadron, British Airways and SingaporeAirlines have refused the technology of the current Jumbo by deeming itprescriptived.
This enforced Boeing to make a revisation its first $ 5 billion,then $ 7 billion improvement predictions. Consolidatingthe jet-fueled sector left only 2 big players rivaling on a global ground. Sucha competitive landscape makes it clear that game theory modeling, of a player’sdecisions depends on the spurts hoped of the other player. Airbus keepsbecoming a bulky consortium of 4 major companies, many of which are European governmentsand thus taxpayers own an important share. In particular, that makes Airbusundefended to psychological attack (but it can succeed in transforming itselfinto a suitable business before the beginning of the millennium). Boeing noticed that if bothplayers decide to improve a super jumbo, they would lose. For this reason ittried to alter the game. But unfortunately, it failed twice.
Being doubtful ofthe VLCT and threatening to play the A3XX’s gold did not dissuade Airbus’sdecision. Boeing’s latest venture was the cancellation of the improvementproject, which was published intensively in the global press last year and backedby detailed assertions on changing consumer demand. Industry analysts at oncepressurized Airbus’ 4 European joints, waiting for the consortium to followwith calling off A3XX. This is game theory, it estimates that it is unlikely tobecome. Boeing’s Mr. Hayhurst said in his annulmentannunciation: “The airbus will have to deal with the problems we have todeal with, what is the dimension of the market, what are the improvement costsand how will the income flow look?” Mr. Hayhurst’s actually meant:”If we destroy us otherwise, we should not investigate a potentiallylucrative market “and” We must prevent our rivals who enters thesemarkets. Bringing a new jet through over 400 seats to the sector is no doubt arisky venture, but the game theory indicates that Boeing is more risky than Airbus.
HOW DO WE COME ACROSS GAME THEORYNOWADAYS ?I amgoing to explain this topic over Airbus and Boeing companies. To explain gametheory, Boeing and Airbus competition, which the whole business world iscurious at the end of the 1990s, is a good starting point. The investmentdecisions of these two giants seem to be one of the best examples in whichcompanies take into account the many risks involved in making investmentdecisions and set up strategy sets with the possibility of competitors makingthe same investments as themselves. This seems to be the main reason behindBoeing’s cancellation of 500-1000 passenger capacity “Superjumbo”production. Our business decisions are not a one-time decision, and they are aconstant game that depends on the decisions of our competitors. Owners of thesuperjumbo project, John Hayhurst, announced that the market was not ready whenthe project was canceled. The market, measured by Boeing for its investment ofover 10 billion dollars, was around 400 vehicles for Boeing’s main rival,Airbus, while it was under 500 vehicles for 1997-2014, with the thought thatpassengers would prefer small direct flights.
Boeing publicly announced thecancellation of the project, but in fact it made a psychological move,reporting that it would not enter a game that neither side would win, and wasaiming to influence decisions made by the rival. This emerges as an analogy to the prisoner confession whichhas been used extensively in the narrative of game theory since the 1950s. Ifwe apply this dilemma for Airbus andBoeing companies, we can summarize the situation like that. each player has twooptions: whether to develop a new,large-capacity passenger plane or not. If two players develop high-capacityaircraft, the market is not big enough for the two companies, so investmentwill not be available and a loss situation will exist for both companies.
Ifone of the players develops and the other player does not develop,while the companywhich developed, will win, the other player will lose. In the case where twofirms do not develop, there is no loss for two firms as there is no investmentwhile there is no gain. Due to the fact that both companies are awareof the situation, Airbus and Boeing have cooperated and decided to develop aplane with a strategic cooperation called Very Large Commercial Transport(VLCT). Thus, the two companies shared the risk and removed a situation thatthey would lose on both sides. But because of the two companies’ worries abouteach other, this cooperation has not made progress. In this case, a newsituation emerged while Boeing’s monopoly continued in the 400+ passengeraircraft market.
I n this new situation, where the likelihood oflosing is likely to be higher or risky, Airbus has given up on the Superjumboproject. From a game theory point of view, Boeing could be perceived as athreat because Airbus’s Superjumbo affected aircraft sales. Explaining thatBoeing gave up on the project, Airbus abandoned entering the market, which itsaw as risky.
While John Hayhurst explained the cancellation of the project andsaid that Airbus would reach the same market-related results, he actually gavethe message, “If entering a potentially profitable market would destroyone of us, let us not enter that market.” As a result of theconsolidations, the passenger transport sector dominated by two big players isseen as a typical example the game theory comes into play. The actions that acompany will take are directly determined by the response of the other company.CONCLUSIONGame theory examines the human behaviors (preferences)of strategic situations in which each player adds his own moves by taking intoconsideration the actions that others will make. From past to today, we comeacross a lot of examples associated with Game Theory but in this study, we tryto examine Game Theory by associating Airbus and Boeing companies.
As it is seenin this work, Boeing company would produce a new jet which is called ‘Superjumbo’. This project would be an overcosting project and they gave up onit because of the fact that they want to share risk with Airbus. Also Boeing company aimed to effect thedecisions of its competitor ( Airbus ) through this decision that they made, aswell. When being explained Game Theory, this situation is often used. Becausethis situation is a very good example for Game Theory. As we can see in thiswork, too ; companies make a decision bytaking into consideration their rivals.
Because in order to exist within thesector, they need to do this and we state this situation as ‘Game Theory ‘.