Institutional model of corporate strategies

The present paper presents a model of investment decisions made by corporations. The decisions in question are perceived as part of corporate strategies, defined in a behavioural way. The model attempts to integrate the classical microeconomics\’ point of view with that of the new institutional economics, formalizing the resulting assumptions on the grounds of three theories of games: Selten\’s, Harsany\i’s and Nash\’s. Corporate strategies are defined as a set of four games: the capital market game, the corporate governance game, the product markets game and the social responsibility game. The four games are played in parallel and in mutual interaction, each of them being a temporarily normalized sub-game of the Selten\’s extensive game with imperfect recall, and being played as a Harsanyi\’s game with imperfect information and various degrees of cooperation. In each of the four games the presence of Nash\’s dynamic equilibrium, manifested as a critical level of consistency in individual players\’ strategies, is of crucial importance. In presence of Nash\’s dynamic equilibrium, corporations orient their behaviour towards development, technological progress included. In the absence of Nash\’s dynamic equilibrium corporations would orient their strategies exclusively on managing risk.