Gas Wars and Takeaways

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来自 University of Virginia 的课程

Market and Competition in Pricing Strategy

60 个评分

University of Virginia

Market and Competition in Pricing Strategy

60 个评分

课程 3（共 4 门，Specialization Pricing Strategy Optimization）

If you haven’t considered what the competition is charging, you may not be maximizing your revenue. Spend time analyzing the market and you can influence price and improve margins. In this course, we'll show you how to implement competitive pricing and avoid common legal pitfalls of market-based pricing. You will also learn how to predict, influence and respond to competitors’ pricing moves. Led by Darden faculty and Boston Consulting Group global pricing experts, this course provides an in-depth understanding of market-based pricing and how to use it to capture more revenue.

从本节课中

Predicting Competitive Reactions

Now that you know more about the playing field, let's take a look at how to predict competitive reactions. Thomas will show you value mapping, a tool that yields valuable insights into the value-price relationship relative to your competitors, and how to apply it in a real-world example. Then you'll dive into game theory, a field with many applications. Here, you'll use it anticipate and respond to price competition so that you can cooperate and compete without colluding.

Introduction to Game Theory2:13

The Prisoner's Dilemma5:40

The Evolution of Cooperation8:48

Signaling Games4:24

Extensive Form Signaling Games7:26

Gas Wars and Takeaways4:37

Week 2 Takeaways0:59

与讲师见面

Jean Manuel Izaret
Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Ronald T. Wilcox
NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs
Marketing
Thomas Kohler
Associate Director, Pricing
Marketing, Sales & Pricing Practice

Now it is good to draw out the extensive form of a game and

go through what we just went through.

I think you can get a lot of good intuition from that.

But you don't always have to do that.

There are real world situations that involve signaling games

where you can really get an intuition of the implications of the game

just by looking at some basic prices.

Let's look now at a couple of gas stations.

So these are two gas stations that are right across from each other.

They both buy their gas from the same supplier at the same amount of money.

And they're setting their price at $2.29 per gallon at the pump.

Now everything's going along just fine and they're both making money, and they're

both selling snacks in their convenience stores located next to the gas station.

Until one day one of the gas stations drops their price,

in an aggressive move, to $1.99.

Now you can imagine what just happened to the demand for

the gas station that's charging $2.29.

That's, I mean, 30 cents difference in price.

Their demand is going to go way down.

No what is that first gas station likely to do?

Well, here's what they might do.

They may drop their price really aggressively, all the way to $1.79,

potentially all the way to the point that they aren't even making any money.

What are they doing?

They're retaliating against that gas station that cut their price to $1.99.

And they may sit there for a couple of periods, bleeding cash.

Right, neither of them are making a lot of money, but

definitely the $1.79 is making very little money.

They may sit there for a couple of weeks.

And then finally, the other gas station that was originally aggressive says,

you know what?

This is hurting pretty bad.

Am going to raise my price to $2.29 again.

And what happens with that first gas station?

Then they raise the price to $2.29 again.

What just happened there?

That first gas station sent a signal, and that signal went lke this.

If you mess with me, I will mess with you.

And that's unmistakable signal to that second gas station.

They never got together, talked about price, coordinated, they didn't do that.

That's illegal.

But they certainly can change prices in a way that sends signals to

their opponent about their future intentions, either to cooperate or

punish the other side if they make aggressive behavior.

That's a very simple signaling strategy that I'm sure was very clear

to that second gas station.

Now what do I really want you to take away from this game theory module?

FIrst of all, know which game you're playing.

Are you really in a prisoner's dilemma game?

Are you, or are you not?

Are there really chances for

cooperation there that you might be able to figure out if you play it repeatedly?

If you're in a repeated game,

understand which of your actions are likely to provoke an aggressive response.

That's not something you want.

But figure that out.

That's something that you really want to avoid.

Compete.

By all means, compete.

You're supposed to compete.

It's good for businesses to compete.

it's good for the world when businesses compete.

But do not destroy.

Don't try to destroy the other side and

get in a huge fight that can be destructive for both of you.

Not only your profit margins but your businesses in general.

Stay focused on your profits, and don't let jealousy cloud your judgement.

And the reason I put that here, everybody, at the end of this module, is because

I have seen it so many times in the games that I've played with my students.

It is so easy for that human emotion to rise to the surface,

to want to beat the ther side.

To be jealous of profits that they have and you don't have.

And when you let that cloud your judgement, you do worse for yourself.

Not just in the arena of pricing but sometimes in the arena of life as well.

Richard Nixon, former President of the United States,

who famously got into a lot of fights, said this.

Always remember, others may hate you, but

those who hate you don't win unless you hate them,

and then you destroy yourself.

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