The Applications of Game Theory in Processing The Orders of Shopee and Lazada.

“The applications of game theory in
processing the orders of Shopee and

Lazada.”
IE128 – OPERATIONS RESEARCH 2
Submitted to:
Prof. Rene Estember
Submitted by:
Haboy, Deceree Anne A.

Sacramento, Daniel John B.
Santos, Ervin Josh P.
Taw, Christine Angelie Y.
Introduction
Background of the Study
The most popular e-commerce platform in the Philippines is Shopee and Lazada.
Lazada is a marketplace for online purchasing and sales. The Company sells products in a variety of areas
including electronics, home-made goods, toys, apparel, equipment for sport and food. Shopee is a
prominent Southeast Asia and Philippines e-commerce platform. It is a region-specific platform that
offers both consumers and sellers smooth, safe, and quick online shopping experience with robust
payment and logistic support.
Lazada and Shopee have a different strategic platform when it comes to their ordering
process. This scenario uses and incorporates Game Theory to evaluate, as the paper asks, "What is the
reaction of the dominating competitor to me? And what is my first, best step, if I know the reaction to
me? Which is the Nash equilibrium?”. In this study, the costumer and the retailer are the two players.
Objective of the study
This research study aims to apply Game Theory to:
1. Determine the effectiveness of Shopee and Lazada in handling customer's orders.

2. Determine the effect of Lazada’s and Shopee's ordering processes on customers.
Review Related Literature
Online Shopping
It should be stated unequivocally that, in recent years, internet purchases have become a
prominent modern channel for customers due to higher internet availability. The Covid-19 pandemic
happened last 2020 has provided a chance for an upsurge in internet purchasing that has been apparent
recently. Online shopping as well as video streaming and other gaming platforms have increased as the
number of individuals going out to dine, shop, or see movies has plummeted (Caña, 2020). In Southeast
Asia, the Philippines had the greatest rise in the usage of shopping applications with over 53 percent. The
iPrice group worked with SimilarWeb and App Annie to map the Philippines' most powerful E-commerce
player and shows that the overall number of shopping app sessions in the country was 4.9 billion. Based
on the survey, ecommerce firms in nations that have implemented stringent social distancing should see a
rise in mobile software engagement and installations. The data also shows that the most popular e-
commerce sites in the Philippines are Shopee, Lazada, and Zalora. Throughout the first trimester of the
year Lazada had an overall combined visit both in computer and phone web of 25,652,100, followed by
Shopee with 15,373,900, and Zalora with 1,669,400 (Aureus, 2019). For the past two years, there is no
doubt that these three businesses have continuously led the Philippine e-commerce sector and will
continue to dominate online shopping since more and more Filipino people are striving toward online
shopping amidst pandemics.
Customer convenience
One of the primary factors driving customer adoption of internet purchasing has been
convenience. Buying and selling things on the internet has become a big part of many people's lives.
People may buy from the safety of their own homes while not having to deal with a salesman. Online
marketplaces offer a novel and better convenient way to trade almost any sort of product or service. Both
firms and customers have embraced internet sales as a more cost-effective and easy method of doing
business. Prior research on online customer satisfaction has highlighted numerous service comfort aspects
specific to virtual commerce, showing some of the factors that make up the level of service quality, such
as simplicity of use, immersiveness, information seeking, information complexity and diversity, and
reliability (Jiang et al, 2013). In this study, the authors conduct in-depth concentrate team discussions
with online customers to determine the characteristics of online buying convenience, and then construct
and verify a five-dimension scale to evaluate online shopping convenience using data obtained from the
target groups. The result shows that access, search, evaluation, transaction, and possession/post-purchase
convenience are the five factors of online buying convenience. This result may be used as a starting point
for more research into e-commerce customer service administration and can help companies identify and
overcome major roadblocks to providing customers with a very convenient online purchasing experience.
Game Theory
Game theory has been frequently used in the literature on production studies. Game theory is a
practical and effective approach for simulating the theoretical behaviors of agents such as businesses,
teams, or people in a variety of competitive and cooperative situations (Choi et al., 2019). Meaningful
implementations of game theory provide a wide range of industrial applications including such resource
utilization, global determinants such as collaborative consumption and sustainable strategies, economic
games performed by industries in challenging and cooperative circumstances, social games of reasonable
resource allocation in competitive environments, chain management games took place in a variety of
sectors, and cognitive games served on an individual level. As a result, there is little question that game
theory may be extremely useful in the field of production research.
Methodology
In this research it was proposed to use Nash equilibrium within game theory. The Nash equilibrium is a
theorem of decision making within the theory of games which asserts that a player may obtain the desired
result by not deviating from his starting approach. In the Nash equilibrium, the strategy of each player is
optimum when taking the choices of other players into account. In our study, the two players are the
costumers and the two-e-commerce platform which is Lazada and Shopee. With the use Game theory, we
will illustrate the companies response to the consumer’s willingness to use a certain online shop platform
and consumer’s response to the ordering process of the company.
References:
C. Cana (2020) Less Fashion, More Gadgets: How the Pandemic Is Shaping Filipinos’
Online Shopping Habits https://www.esquiremag.ph/money/industry/filipino-online-
shopping-habits-during-pandemic-a0 0289-20201015-lfrm
A & Z Jiang (2013) Measuring consumer perceptions of online shopping convenience.
https://www.researchgate.net/publication/240917798_Measuring_consumer_perceptions_of_onl
ine_shopping_convenience
T. Choi (2019) Game theory applications in production research in the sharing and circular
economy era https://www.tandfonline.com/doi/full/10.1080/00207543.2019.1681137
https://e27.co/lazada-shopee-and-zalora-are-most-visited-e-commerce-sites-in-philippines-
20190 610/
Chen, J., (2021). Nash Equilibrium. https://www.investopedia.com/terms/n/nash-
equilibrium.asp#example-of-nash-equilibrium

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“The applications of game theory in

processing the orders of Shopee and

IE128 – OPERATIONS RESEARCH 2

Prof. Rene Estember

Haboy, Deceree Anne A.

Background of the Study

Objective of the study

This research study aims to apply Game Theory to:

1. Determine the effectiveness of Shopee and Lazada in handling customer's orders.

Review Related Literature

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