Application of game theory in decision making strategy: Does gas fuel industry need to kill oil based fuel industry?

• Main Authors: Azmi, Abdul Luky Shofi’ul, Prabandari, Dyah Lusiana, Hakim, Muhammad Lintang Islami
• Format: Conference Proceeding
• Language: English
• Subjects: Conversion; Decision making; Decision theory; Fuels; Game theory; Substitutes; Transportation
• ISSN: 0094-243X; 1551-7616
• DOI: 10.1063/1.4979253

Even though conversion of oil based fuel (Bahan Bakar Minyak) into gas fuel (Bahan Bakar Gas) for transportation (both land and sea) is one of the priority programs of the government of Indonesia, rules that have been established merely basic rules of gas fuel usage license for transportation, without discussing position of gas fuel related to oil based fuel in detail. This paper focus on possible strategic behavior of the key players in the oil-gas fuel conversion game, who will be impacted by the position of gas fuel as complement or substitution of oil based fuel. These players include industry of oil based fuel, industry of gas fuel, and the government. Modeling is made based on two different conditions: government plays a passive role and government plays an active role in legislating additional rules that may benefit industry of gas fuel. Results obtained under a passive government is that industry of oil based fuel need to accommodate the presence of industry of gas fuel, and industry of gas fuel does not kill/ eliminate the oil based fuel, or gas fuel serves as a complement. While in an active government, the industry of oil based fuel need to increase its negotiation spending in the first phase so that the additional rule that benefitting industry of gas fuel would not be legislated, while industry of gas fuel chooses to indifferent; however, in the last stage, gas fuel turned to be competitive or choose its role to be substitution.