Managing Price Competition
Game Theory Should Guide Pricing Strategy, but Be Sure to Pick the Right Playing Field
Marketing Management
Vol. 2, No.1, 1993

Abstract:
Game theory should guide pricing strategy, but be sure to pick the right playing field. No weapon in a marketers arsenal can boost sales more quickly than price. Price discounting in competitive markets — whether explicit or disguised with rebates, coupons, or promotions — is almost a sure bet to enhance immediate sales. It is easy to become seduced by these quick highs and fail to recognize the long-term consequences. The price cut that boosts your sales today will invariably change the industry you compete in tomorrow, and frequently that change is for the worse.

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