A Game Theory Investigation of Contract between IT Vendor and User in Troubles of Information System

Abstract

We model a contract between a user company and an IT vendor as a two-person non-zero-sum game. If a contract does not have compensation for damages items, the IT vender does not make any efforts to reduce troubles. However if there is the item, this game changes among the non-execution game, the prisoner’s dilemma and the execution game. They do not make any trouble reduction efforts in this prisoner’s dilemma though a Pareto optimum does not. Therefore, we examine the effectiveness of the incentive contract. However, the incentive contract does not have any effects. Next, we examine an iterated prisoner’s dilemma. As a result, the user and the IT vender both make the efforts to reduce system troubles. For this, the user must have a smart and retaliated strategy such as TFT.