Sharing Knowledge to an Entrant for Production Investment Confronting COVID-19: Incentive Alignment and Lose-Lose Dilemma

Area of Science:

• Business Strategy
• Game Theory
• Operations Management

Background:

• Automakers entered ventilator manufacturing during COVID-19, facing production inefficiencies and demand uncertainty.
• Incumbent ventilator manufacturers shared knowledge (production techniques, demand data) as a social responsibility measure.

Purpose of the Study:

• To analyze the profitability of incumbent ventilator manufacturers sharing knowledge with entrant rivals.
• To identify conditions for "win-win" (social responsibility and profitability) and "lose-lose" scenarios.

Main Methods:

• Developed a game-theoretic model of two-dimensional competition (production investment, sales volume).
• Examined incumbent profitability with and without knowledge sharing, considering tradeoffs.

Main Results:

• Identified both "win-win" and "lose-lose" outcomes for competing manufacturers.
• Free knowledge sharing can negatively impact the entrant.
• Incumbent benefits from sharing when competition is intense or production efficiency varies in mild competition.

Conclusions:

• Knowledge sharing in the ventilator market is complex, with potential benefits and drawbacks for both incumbents and entrants.
• The strategic decision to share knowledge depends on market competition intensity and production investment efficiency.