Both Myntra and Jabong have been engaged in discount wars to gain market share in the online fashion and apparel market in India. The author models this interaction using game theory and designs two games with different payoff structures. Analyzing the games, the Nash equilibrium for the game with profit as the payoff is for both players to not offer discounts, while the game with revenue as the payoff results in both players offering discounts. However, since the players' current focus is on acquiring customers, they are likely to play the revenue game, resulting in ongoing discount wars between the two companies.
The good the bad and the ugly_ Dirty tricks in Negotiation_2013 v5.0Helen Wilcox
This document summarizes the results of a survey on negotiation tactics used by buyers and sellers. The survey found that while buyers and sellers claim to prefer ethical negotiations, their actual reported behaviors differ. 29% of respondents thought bluffing and lying were acceptable. Buyers were more likely to say lying is part of negotiations and less likely to correct mistakes in their favor. Both buyers and sellers reported being willing to do deals that financially benefit themselves at the other's expense. The survey also collected examples of "dirty tricks" used, ranging from intimidation to bribery. In conclusion, the survey suggests negotiations in practice involve more tactics and ethical gray areas than participants' stated preferences would indicate.
1) Marketing professionals and CMOs will face increased scrutiny and pressure to prove their accountability and deliver results in 2013, as the global economic outlook remains uncertain.
2) CMOs need to streamline marketing operations, make budgets work harder, and justify spending to increase ROI, while also listening more to consumer feedback.
3) To regain control, CMOs should establish a framework to focus efforts internally and with agencies, improve briefing processes, renegotiate media commitments if needed, and ensure agency incentives are aligned with business goals.
This document discusses key concepts in game theory and provides examples of how game theory can be applied to economics. It covers topics like the prisoner's dilemma, pricing games between firms, and evaluating factors like first mover advantage. Examples are given around oil markets, price wars, and advertising spending. Limitations of game theory are noted, such as its tendency to oversimplify complex business decisions.
Maximizing Monetization - Casual Connect SF 2013emily_greer
Maximizing monetization in free-to-play games. The presenter discusses how virtual goods pricing works based on principles of imperfect competition and monopoly pricing. Key factors that drive monetization include retention, engagement over time which increases demand elasticity, desirable permanent upgrades over consumables, and events/sales that incentivize both committed and lapsed spenders. Data from games like Bloons Tower Defense and Tyrant show how monetization can be exponentially improved through revised systems that allow for continuous investment and natural price differentiation between player segments.
A Single period co operative advertising model where demand is dependent on p...iosrjce
We consider an extension of the co-operative advertising model developed earlier by the authors. We
consider a manufacturer-retailer channel co-ordination where the demand is modeled as a multiplicative effect
of price and an additive sales response function. We develop both sequential and simultaneous moves non cooperative
game structures where both retailer and manufacturer act simultaneously and independently and
compare them through propositions. Finally we develop a cooperative model and discuss the optimality of
pareto efficient scheme
Glo bus 2018 grand champion tips 2018-10-09 how to win GLO-BUSwilliampatricklaw
Glo-Bus 2018 winning strategies from a 2018 Grand Champion.
Revised Video and Tips 2018-10-13
Contact me if you need help: w.patrick.law@gmail.com. I will never sell you anything, but I would appreciate it if you like, comment and subscribe.
Videos:
Detailed Pro Tips: https://youtu.be/VVqQ7VAaJSA
Other (Simplified) Video: https://youtu.be/omTK1GmVo0Y
Oligopoly content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Oligopoly
Non-Cooperative Strategy I: The Kinked Demand Curve Model
Non-Cooperative Strategy II: Game Theory
Cooperative Strategy: Collusion & Cartels
Non-price Competition
The good the bad and the ugly_ Dirty tricks in Negotiation_2013 v5.0Helen Wilcox
This document summarizes the results of a survey on negotiation tactics used by buyers and sellers. The survey found that while buyers and sellers claim to prefer ethical negotiations, their actual reported behaviors differ. 29% of respondents thought bluffing and lying were acceptable. Buyers were more likely to say lying is part of negotiations and less likely to correct mistakes in their favor. Both buyers and sellers reported being willing to do deals that financially benefit themselves at the other's expense. The survey also collected examples of "dirty tricks" used, ranging from intimidation to bribery. In conclusion, the survey suggests negotiations in practice involve more tactics and ethical gray areas than participants' stated preferences would indicate.
1) Marketing professionals and CMOs will face increased scrutiny and pressure to prove their accountability and deliver results in 2013, as the global economic outlook remains uncertain.
2) CMOs need to streamline marketing operations, make budgets work harder, and justify spending to increase ROI, while also listening more to consumer feedback.
3) To regain control, CMOs should establish a framework to focus efforts internally and with agencies, improve briefing processes, renegotiate media commitments if needed, and ensure agency incentives are aligned with business goals.
This document discusses key concepts in game theory and provides examples of how game theory can be applied to economics. It covers topics like the prisoner's dilemma, pricing games between firms, and evaluating factors like first mover advantage. Examples are given around oil markets, price wars, and advertising spending. Limitations of game theory are noted, such as its tendency to oversimplify complex business decisions.
Maximizing Monetization - Casual Connect SF 2013emily_greer
Maximizing monetization in free-to-play games. The presenter discusses how virtual goods pricing works based on principles of imperfect competition and monopoly pricing. Key factors that drive monetization include retention, engagement over time which increases demand elasticity, desirable permanent upgrades over consumables, and events/sales that incentivize both committed and lapsed spenders. Data from games like Bloons Tower Defense and Tyrant show how monetization can be exponentially improved through revised systems that allow for continuous investment and natural price differentiation between player segments.
A Single period co operative advertising model where demand is dependent on p...iosrjce
We consider an extension of the co-operative advertising model developed earlier by the authors. We
consider a manufacturer-retailer channel co-ordination where the demand is modeled as a multiplicative effect
of price and an additive sales response function. We develop both sequential and simultaneous moves non cooperative
game structures where both retailer and manufacturer act simultaneously and independently and
compare them through propositions. Finally we develop a cooperative model and discuss the optimality of
pareto efficient scheme
Glo bus 2018 grand champion tips 2018-10-09 how to win GLO-BUSwilliampatricklaw
Glo-Bus 2018 winning strategies from a 2018 Grand Champion.
Revised Video and Tips 2018-10-13
Contact me if you need help: w.patrick.law@gmail.com. I will never sell you anything, but I would appreciate it if you like, comment and subscribe.
Videos:
Detailed Pro Tips: https://youtu.be/VVqQ7VAaJSA
Other (Simplified) Video: https://youtu.be/omTK1GmVo0Y
Oligopoly content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Oligopoly
Non-Cooperative Strategy I: The Kinked Demand Curve Model
Non-Cooperative Strategy II: Game Theory
Cooperative Strategy: Collusion & Cartels
Non-price Competition
Match Makingin B2B Using Extensive Games with Perfect Information ijgttjournal
Match making is becoming important in this rapidly changing world for identifying the required supplier and buyer pair. In this paper we are building a mathematical model using extensive games with perfect information, Nash equilibrium is found in order to find the exact match. The matching is based on multi
attribute priority, the attribute are called constraints which are classified into hard and soft constraints are identified. The best matched is identified by running the algorithm on Mat Lab and even here time is considered. Two models are designed first model is one manufacturer and n-suppliers and second model is
m-manufacturers and n-suppliers.
This document provides an overview of game theory concepts including the Prisoner's Dilemma, Nash Equilibrium, payoff matrices, pure and mixed strategies, and zero-sum games. It discusses terminology used in game theory like the number of players, strategies, and payoffs. Examples are provided to illustrate concepts like saddle points, dominance rules, and solving 2x2, 2x3, and 4x2 games using graphical and algebraic methods.
Here are the key points about Chinesegamers' WALKFUN mobile game platform strategy:
- Targets mobile game players in China
- China has a huge and growing mobile games market
- By building a platform, Chinesegamers can aggregate players and games in one place
- This allows them to monetize the platform through things like in-game payments, ads, etc.
- The strategy is to attract both game developers to publish games on the platform for exposure to players
- And to attract players by offering a wide selection of games in one centralized location
So in summary, the key players in their strategy are mobile game developers and players in China. By building a platform, they aim to be the
Freemium Premium Le système économique des jeux vidéosJonathan Jedrasiak
This document discusses various business models used in the video game industry, including paid physical sales, subscriptions, and free-to-play models. It describes how free-to-play games allow users to download the full game for free but encourage microtransactions for additional content. Free-to-play games employ techniques like pay-to-win and pay-to-entertain mechanics as well as social features and timed restrictions to incentivize spending. The document also examines specific examples like League of Legends, Hearthstone, and Guild Wars 2 to illustrate different monetization approaches in popular games.
The document discusses the changing global games market and opportunities across different screens. It notes that games are now played on multiple screens, often free-to-play with in-game purchases, and treated as ongoing services. This requires companies to adapt business models and organizations. Emerging markets are major drivers of growth, though mature markets still generate most revenue. The games industry is increasingly global and competitive.
The document outlines a product strategy for a mobile game called 2Patti Loot targeted at North Indian traders in Bangalore. It discusses developing a mobile version of the popular 3Patti card game to keep traders occupied during downtime. Key points include:
- The game will have 6 variations of 3Patti/Teen Patti to engage players.
- The total addressable market is estimated at 20 million players across India, Pakistan and the US aged 19-54.
- The MVP will focus on single player gameplay in portrait mode for flexibility.
- Key competitors offer landscape mode only so portrait mode is a unique value proposition.
- A monthly marketing plan is outlined to boost app
Some examples of monopoly companies include Microsoft, Intel, and Google. A monopoly company dominates the market as the sole or primary supplier, allowing it to set prices. When a company gains too much power through monopolization, governments may intervene by requiring the company to sell some assets to reduce its market share.
Idiro Analytics - Social Network Analysis for Online GamingIdiro Analytics
Idiro is a company that specializes in social network analysis (SNA) and advanced analytics to help online gaming companies. They can use SNA to detect social communities within games and predict player behavior. This allows gaming companies to increase revenue, reduce player defection, and identify cross-sell opportunities. Idiro's SNA tools can analyze player social data to predict which players may stop playing, segment the player base, identify players likely to purchase additional items or services, and find influential players. Understanding relationships between players is key as many players select games based on friends' recommendations. Idiro can help gaming companies apply SNA to better understand players and maximize retention and monetization.
Game theory is the study of how optimal strategies are formulated in conflict situations involving two or more rational opponents with competing interests. It considers how the strategies of one player will impact the outcomes for others. Game theory models classify games based on the number of players, whether the total payoff is zero-sum, and the types of strategies used. The minimax-maximin principle provides a way to determine optimal strategies without knowing the opponent's strategy by having each player maximize their minimum payoff or minimize their maximum loss. A saddle point exists when the maximin and minimax values are equal, indicating optimal strategies for both players.
This document summarizes key concepts from a chapter on utility and game theory. It discusses the meaning of utility and how it differs from expected monetary value. Decision makers can have different attitudes towards risk, from risk averse to risk taking. Game theory analyzes situations with multiple decision makers competing for outcomes. Players choose strategies independently and the combination of strategies determines each player's payoff. Games can have pure or mixed optimal strategies depending on whether a saddle point exists.
Big Data in Retail - Examples in ActionDavid Pittman
This use case looks at how savvy retailers can use "big data" - combining data from web browsing patterns, social media, industry forecasts, existing customer records, etc. - to predict trends, prepare for demand, pinpoint customers, optimize pricing and promotions, and monitor real-time analytics and results. For more information, visit http://www.IBMbigdatahub.com
Follow us on Twitter.com/IBMbigdata
Modeling+pricing+strategies+using+game+theory+and+support+vector+machinesMuhammad Akbar Khan
This document discusses modeling pricing strategies in the credit industry using game theory and support vector machines (SVMs). It proposes a model where pricing is determined through a game-theoretic framework modeling competition between companies. Demand is estimated at the customer-level using SVMs to incorporate a large number of variables. This detailed demand estimation is then used in a market-level game theoretic model to understand the strategic interactions between competitors. The model allows companies to gain insights into customer behavior and competitor strategies to inform their own pricing decisions.
This document discusses the concept of "coopetition" introduced by Adam Brandenburger and Barry Nalebuff in their 1996 book. They applied game theory to business strategy and argued that business involves both competition and cooperation. Successful businesses must compete to divide the pie but also cooperate to make the pie larger. The authors also discuss how companies can change the rules of the game to their advantage by altering the players involved, added values, rules, tactics, or scope of the game. Changing any of these elements can change the entire game.
This document discusses monopoly companies and provides examples such as Microsoft, Intel and Google. It then discusses related concepts like market share, competition, pricing strategies and loss leaders. Specific examples discussed include pricing wars between Microsoft, Sony and Nintendo consoles. Factors that influence price sensitivity are also examined such as whether a product is a want or need, availability of alternatives/substitutes and market regulations.
This document provides an overview of key concepts in game theory and oligopoly models. It discusses oligopoly market structures where a few firms account for most production. It also covers the Cournot and Bertrand models of oligopoly competition. The document explores game theory concepts such as the prisoner's dilemma, Nash equilibrium, dominant strategies, and repeated games. It examines how these concepts apply to oligopolistic pricing behaviors and the implications of threats, commitments and credibility in strategic interactions between firms.
This document provides an outline and summaries from sessions at the Casual Connect 2015 mobile game conference held from August 11-13. Day 1 sessions focused on success in mobile game publishing, monetization through ads and publishing in China. Day 2 covered smarter monetization strategies, best practices for mobile advertising, and considerations for building an in-house monetization platform versus outsourcing. Day 3 topics included navigating the mobile advertising industry, user acquisition optimization and the mobile game market in South Korea.
This document discusses the economy systems used in many popular MMORPG games. It begins by defining what an MMORPG economy is and why it is important for player engagement and achievement. It then describes how traditional economies, known as "faucet and drain", work by introducing money into the game through various means and removing it through spending. However, it notes that these systems can result in inflation over time as more money and items accumulate. The document explores changes to economies over time, with recent games making many high-level items untradeable to encourage playing specific gameplay content. It questions whether improvements could be made to better balance player vs player interactions and economies.
Game theory is used to analyze strategic decision-making situations involving multiple players under conditions of conflict or competition. It can help determine the best strategy for a firm given competitors' expected countermoves. Key concepts include pure and mixed strategies, optimal strategies, the value of the game, zero-sum and non-zero-sum games, and using payoff matrices to represent two-person zero-sum games and determine if a saddle point exists. When there is no saddle point, mixed strategies involving probabilities of different actions can determine the value of the game.
During economic downturns, companies often cut back on products and services offered to customers due to rising costs. For example, Harrah's reduced premium services in their VIP lounges. Retailers are cutting prices to reduce inventory and remain competitive. Hotels and airlines are also lowering prices through online travel agencies. Many companies are focusing marketing promotions on value to appeal to cost-conscious consumers during the recession.
Gamers Coin aims to be the largest "Battle and get Paid" application by introducing a new way for online gamers to earn income through playing games. It will allow gamers to find opponents and bet against each other in their favorite games. The company aims to create the world's first ecosystem where all gamers, from beginners to pros, can benefit financially from playing multiplayer online games and participating in tournaments. Currently, 99% of online gamers do not earn any money for their gameplay, so Gamers Coin wants to solve this problem by rewarding all levels of players based on their skill level and results.
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Match making is becoming important in this rapidly changing world for identifying the required supplier and buyer pair. In this paper we are building a mathematical model using extensive games with perfect information, Nash equilibrium is found in order to find the exact match. The matching is based on multi
attribute priority, the attribute are called constraints which are classified into hard and soft constraints are identified. The best matched is identified by running the algorithm on Mat Lab and even here time is considered. Two models are designed first model is one manufacturer and n-suppliers and second model is
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- The strategy is to attract both game developers to publish games on the platform for exposure to players
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The document discusses the changing global games market and opportunities across different screens. It notes that games are now played on multiple screens, often free-to-play with in-game purchases, and treated as ongoing services. This requires companies to adapt business models and organizations. Emerging markets are major drivers of growth, though mature markets still generate most revenue. The games industry is increasingly global and competitive.
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- The game will have 6 variations of 3Patti/Teen Patti to engage players.
- The total addressable market is estimated at 20 million players across India, Pakistan and the US aged 19-54.
- The MVP will focus on single player gameplay in portrait mode for flexibility.
- Key competitors offer landscape mode only so portrait mode is a unique value proposition.
- A monthly marketing plan is outlined to boost app
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Similar to Jabong Vs. Myntra Discount Wars Game Theory (20)
1. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
Game Theory Term
Paper –
“E-Commerce
Discount Wars
(Myntra vs. Jabong)”
Radhika Singh PGP/17/357
Chand Ajmera PGP/17/192
2. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
1 | P a g e
Executive Summary
Price has always been a handy tool used by companies with undifferentiated products in the
battle for market share. A price war is said to have initiated when two or more companies
continually lower prices to undercut each other’s market share
Even though theories suggest that Price wars can be loss-loss for both the parties, price wars
are becoming increasingly common because it is quick, easy and reversible action. In some
cases, price wars can alter the industry structure as a whole but there are evidences that prove
the contrary as well. Many a times resorting to price war is not the only available option to gain
the upper hand, changing the game is an alternative option which can help avoid losses to the
company as well as to the industry
The scope of this term paper is to use Game theory to analyze the price war game currently
being played between two ecommerce fashion and apparel players Myntra and Jabong and
also predict the future implication of the games currently being played. It will help in deciding
whether indulging into price war makes sense to the firm and how can the price war be fought
or avoided at first place by the firms.
We have designed two games taking into consideration profit and revenues as pay-offs. Both
the players have four moves at their disposal: Discount, Discount + Back-Up Plan (give less
discount now but invest in alternative strategies), No Discount and Collude. The Nash
equilibrium for the game with profit as pay-off turns out to be (No Discount, No Discount) while
for the game with revenue as pay-off turns out to be (Discount, Discount). But since the current
focus of both the players is acquiring and maintaining the customer base, they will resort to
playing Game No. 2.
Further analysis suggested that if (Discount, Discount) is played in an infinitely repeated game
then the relatively patient player (in this case, Jabong since it has strong financial back-up) will
be able to survive as well as get higher share of the pie. So the best option for Myntra is to
avoid price war and signal Jabong that it is ready to compete on other parameters like Variety,
No of vendors, Quality of vendors acquired and Customer Service. In the hindsight, given that
Jabong is highly unpredictable player, Myntra should build up a superior cost structure and
capabilities so that it can combat future price wars more effectively.
Introduction
Myntra: It is an Indian online shopping retailer of fashion and casual lifestyle products,
headquartered in Bangalore, Karnataka. It was established in 2007 and has been funded by
Venture Capital funds like Tiger, Kalarri, Premji Invest, IDG & Accel Partners. From 2007 to
2010, it was providing personalized products like keychains, mugs, greeting cards, calendars,
3. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
2 | P a g e
etc. However in 2010, it ventured into retail fashion and lifestyle products. Myntra currently
offers products from more than 600 brands. Myntra’s current market is valued at 1000 crore
Rs. Following table gives the market share of Myntra over the years 2009 to 2013.
2009 2010 2011 2012 2013
1.9 2.3 2.6 3.4 4.1
Myntra has come up with many private label brands recently and is planning to increase the
share of the same. The contribution margin from private label brands is 60% and from the
featured brands is 20-30%. In 2013, Myntra acquired San Francisco based company which is a
developer of 3D virtual fitting technology. Moreover Hrithik Roshan’s apparel brand HRX will be
a featured brand store in Myntra. It aims to become 2800 million dollars Fashion Company by
2020.
Jabong: Jabong, an online retailer of fashion and lifestyle products, was established in
2012.Jabong has been incubated by a German Company, Rocket Internet founded by three
Internet billionaires. Jabong currently offers more than 1000 brands. The annual revenue of
Jabong is estimated to be approx. 750 Crore Rs. Jabong has been known for growing to 3/4th of
Myntra’s size in just 15 months and it is known for running intensive marketing campaign.
According to the founder of Myntra, Jabong has the habit of replicating Myntra’s moves and
sometimes while hurting Myntra, it hurts itself too. Jabong has recently partnered with Rohit
Bahl and NBA for retailing their merchandise.
Discount/Price Wars Game
Response Available
Both the players have 4 moves at their disposal.
Give Discount ( D ) – A player will play D i.e. give discount on its products to acquire new
customers even though its contribution margin will be lower than in case when it
doesn’t give discount
Give Discount + Back Up Plan ( D’+ BP) – A player will play D’+ BP where D’< D i.e. it will
give a lower discount and will use the remaining cash to invest in future back up plans
like building up logistics & infrastructure , tying up with brands exclusively etc.
No Discount (ND) – A player will give no discount and will maintain price
Collude (C) – A player will join hands with the other player involved and resolve to
maintain price
Financial Performance & Non-financial Performance of Players
Financial Performance:
4. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
3 | P a g e
Statistics Jabong Myntra
Revenue 750 cr. 1000 cr.
Revenue /pm 625000000 (62.5 cr.) 833333333.3 (83.3 cr.)
No.Of transaction/Month 4,20,000 2,40,000
Overall Apparel Market 16910 cr.
Overall Apparel Market –
Jabong- Myntra
15160 cr.
Non-Financial Performance: To understand the non- financial performance of both the players
we evaluated them on the following basis:-
Ratings Myntra Jabong
Variety 8 8
No of Vendors 7.5 9
Service 8 7
UserInterface 9 9
Marketing 8 9
Price 7.5 8
Overall Rating 8 8.333333
In traditional discount / Price war game (where the products are homogenous), if one player
reduces price and the other does not, the latter will lose all its market but given in this case the
products & services are not homogenous and therefore the market is not driven totally by
price, only x% of the customers will move to the player giving higher discounts.
Assumptions & Rules of the Game
Assumption 1: 60% of the Consumers of Myntra is price sensitive and therefore will
switch to Jabong in case Jabong gives discount and Myntra doesn’t.
Since rating of Jabong is 8.33 and that of Myntra is 8, hence the similar switch % for
Jabong will be equal to 57.6% (60*8/8.33) i.e. only 57.6 % will switch to Myntra in case if
Myntra gives a discount and Jabong doesn’t
Assumption 2: In case of discount, apart from acquiring customers from each other,
they would be able to acquire 10% of the remaining apparel market. In case both the
players play (discount, discount) the newly acquired market will be split equally among
both of them
Assumption 3: We have assumed a similar contribution margin for both the players.
Given below are the details
5. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
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Move Contribution Margin ( Profit/ Sales)%
D 5%
D+BP 5% ( Less Discount but the remaining is invested for future developments)
ND 35%
C 35%
Assumptions 4 : In case Myntra decides to play D+BP ( give discount but not as much as
Jabong + Invest in future) it will be able to retain 65.71% of the customers ( only 34.29%
will switch) while the similar no. for Jabong will be 67.43% ( Only 32.57% will switch)
Calculation:
Assuming Myntra Avg. discount Given (D=35%) while in case of D+BP move it is 20%
now the % switch will be
For Myntra = 60* (20/35) = 34.29%
For Jabong = 57.6* (20/35) = 32.57%
Assumption 5: In case both players (D,D), (D+BP, D+BP), Customers will not be inclined
to switch to the other
Assumption 6: Additionally while when both players play (D,D) both will be able to
acquire 10% of remaining apparel market, it will reduce to 7% if both players play (D+BP,
D+BP)
Other Cases:
- In case players play (D, D+BP), they claim 10% market share distributed in the ratio
of their discount i.e. (35: 20) and vice versa
- In case players play ( ND, D+BP), the entire 7% will be retained by the player playing
D+BP
Assumption 7: In case both the players play (ND, ND) , both retain the market share
Assumption 8: In case of Collusion
Case 1: If both players collude, they will lose 20% market, because the market is price
sensitive. Both will share the revenues
Case 2: In case players play ( C, D) , the player playing collude will lose out 10 % more
costumers because of its forever resolve to not give discount while the player playing D
will get switched customers from Player A + 10% Acquired from remaining market
Case 3: In case players play (C, D+BP) , the player playing Colludes loss will be same as
before but the player playing D+BP will get Switched customers from A + 7% market
share from B because of reduced discount
Game
Game with Profit as Pay Off
Myntra
Discount Discount + Back Up No Discount Collude
6. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
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Plan
Jabong Discount 6.28, 7.33 8.57, 5.04 11.94, 11.67 11.94, 8.57
Discount + Back Up
Plan
4.40, 9.20 5.34, 6.38 8.97, 19.17 8.97, 16.25
No Discount 9.41, 12.26 14.75, 9.6 21.9, 29.17 21.9, 26.25
Collude 7.22, 12.264 12.56, 9.6 19.68, 29.17 20.42, 20.42
Calculation of payoffs:
Strategy PayoffFormula Calculation
Discount,
Discount
= (CurrentMarketShare + Proportionof newly
acquiredmarketshare)/12*ContributionMargin
duringdiscounts(Forboththe firms)
= ((750 + 1516/2)/12)*0.05
= ((1000 + 1516/2)/12)*0.05
= 6.28, 7.33
Discount,
Discount+
BP
= ((CurrentMarketShare + Market share gained
due to switching+newlyacquiredmarket
share)/12)*ContributionMarginduringdiscount
= ((DiminishedMarketShare)/12)*Contribution
Margin duringDiscount+ Back Up plan
= ((750 + 1000*0.342857 +
964.7273)/12)*0.05
= ((1000*(100-34.2857)/100 +
551.2727)/12)*0.05
= 8.57, 5.04
Discount,
No Discount
= ((CurrentMarketShare + Market Share gained
due to switching+newlyacquiredmarket
share)/12) * ContributionMarginduringdiscount
= ((DiminishedMarketShare) /12) * Contribution
Margin
= ((750 + 1000*0.60 +
1516)/12)*0.05
= ((1000*0.40)/12)*0.35
= 11.94, 11.67
Discount,
Collude
= ((CurrentMarketShare + Market Share gained
due to switching+newlyacquiredmarket
share)/12) * ContributionMarginduringdiscount
= ((DiminishedMarketShare) /12) * Contribution
Margin
= ((750 + 1000*0.60 +
1516)/12)*0.05
= ((1000*0.30)/12)*0.35
= 11.94, 8.57
Discount+
BP, Discount
= ((DiminishedMarketShare + NewlyAcquired
Market Share)/12)*ContributionMargin
= ((CurrentMarketShare + Market Share gained
due to switching+newlyacquiredmarket
share)/12) * ContributionMarginduringdiscount
= ((750(100-32.57)/100 + 551.27 ) /
12) * 0.35
= ((1000 + 750 * 32.57 + 964.73) /
12) * 0.05
= 4.40, 9.20
Discount+
BP, Discount
= ((CurrentMarketShare + NewlyAcquired
Market Share)/12)*ContributionMargin
= ((750 + 1061.2/2)/12)*0.35
7. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
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+ BP (Forboth the firms) = ((1000 + 1061.2/2)/12)*0.35
= 5.34, 6.38
Discount+
BP, No
Discount
= ((CurrentMarketShare + NewlyAcquired
Market + MarketShare gaineddue to
switching)/12)*ContributionMargin
= ((DiminishedMarketShare)/12)*Contribution
Margin
= ((750 + 1061.2 +
1000*0.34286)/12)*0.35
= ((1000*(100-34.286))/1200)*0.35
= 8.94, 19.17
Discount+
BP, Collude
= ((CurrentMarketShare + NewlyAcquired
Market + MarketShare gaineddue to
switching)/12)*ContributionMargin
= ((DiminishedMarketShare)/12)*Contribution
Margin
= ((750 + 1061.2 +
1000*0.34286)/12)*0.35
= ((1000*(100-34.286-
10))/1200)*0.35
= 8.97, 16.25
No
Discount,
Discount
= ((DiminishedMarketShare) /12) * Contribution
Margin
= ((Marketshare + NewlyAcquiredMarketShare
+ Market Share gained due toswitching) /12) *
ContributionMargin
= ((750*0.43)/12)*0.35
= ((1000 + 750*0.57 + 1516) / 12) *
0.05
= 9.41, 12.26
No
Discount,
Discount+
BP
= ((DiminishedMarketShare) /12) * Contribution
Margin
=((Marketshare + NewlyAcquiredMarketShare
+ Market Share gaineddue toswitching) /12) *
ContributionMargin
= ((750*(100-32.57))/1200) *0.35
= ((1000 + 750*0.3257 +
1061.2)/12)*0.35
= 14.75, 9.6
No
Discount,
No Discount
= (CurrentMarketShare/12)*Contribution
Margin
(Forboth the firms)
= (750/12)*0.35
= (1000/12)*0.35
= 21.9, 29.17
No
Discount,
Collude
= (CurrentMarketShare/12)*Contribution
Margin
= (DiminishedMarketShare/12) * Contribution
Margin
= (750/12)*0.35
= ((1000*0.90)/12)*0.35
= 21.9, 26.25
Collude,
Discount
= (Diminished MarketShare)/12) * Contribution
Margin
= ((CurrentMarketShare + Market Share gained
due to switching+Newlyacquiredmarketshare)
/ 12) * ContributionMargin
= ((750*(100-57-10))/1200 )*0.35
= ((1000 + 750*0.57 +
1516)/12)*0.05
= 7.22, 12.264
8. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
7 | P a g e
Collude,
Discount+
BP
= (DiminishedMarketShare)/12* Contribution
Margin
= ((CurrentMarketShare + Market Share gained
due to switching+Newlyacquiredmarketshare)
/ 12) * ContributionMargin
= ((750*(100-10-32.57) / 100) / 12) *
0.35
= ((1000 + 750*0.3257 +
1061.2)/12)*0.35
= 12.56, 9.6
Collude,No
Discount
= (DiminishedMarketShare)/12* Contribution
Margin
= (CurrentMarketShare)/12*Contribution
Margin
= (750*0.90)/12*0.35
= (1000/12)*0.35
= 19.68, 29.17
Collude,
Collude
= Equal Divisionof MarketShare = ((1000+750)/(12*2))*0.35
= 20.42
Game with Revenue as Pay Off
Myntra
Discount Discount + Back Up No Discount Collude
Discount 125.67, 146.5 171.4, 100.7 238.83, 33.33 238.83, 24.86
Discount + Back
Up
88.08, 184.08 106.71, 127.55 179, 54.76 179, 46.43
Jabong No Discount 26.875, 245.29 42.14, 192.12 62.5, 83.3 62.5, 75
Collude 20.625, 245.29 35.89, 192.12 56.23, 83.3 58.33, 58.33
We see that if in case the payoff is calculated in terms of revenue, (Discount, Discount) is the
Nash Equilibrium of this outcome, which is the game Myntra & Jabong are currently playing. In
current times when the E-commerce market is said to grow from $1.8 bn. currently to $ 65 bn.
each one of them is trying to maximize their revenue that is acquire more and more customers
even though from profitability point of view both of them are worse off.
From the above two games, we can see from Game 1 that the profit-payoff for (Discount,
Discount) is much lower compared to (No Discount, No Discount). A time may come when both
of them will start moving towards (No Discount, No Discount) strategy as they start becoming
cash trapped or even a situation may arise when either of the players might move out of the
industry or get acquired by the other.
This outcome will depend upon the patience factor for each player. As we are aware that
Jabong is financially strong as compared to Myntra, we assume that delta of Jabong is 0.9 and
that of Myntra is 0.8. If price war game is repeated for infinite number of months, following
will be the payoffs:
9. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
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Jabong: 6.8*(0.9)/0.1 = 61.2
Myntra: 7.33*(0.8)/0.2 = 29.32
*difference in pay-offs is significant
Initially in the price-war game, the difference in pay-off of Jabong and Myntra in a one shot
game is (7.33-6.28) 1.05 but if the game is infinitely repeated, then the gap increases ( 61.92-
29.32= 31.88) Jabong (the one having strong back up from Internet billionaires) will survive but
the situation of Myntra will be really bad. Also comparing the % share of the pie if both play
(D,D) strategy shows that while in a one shot game the pie is distributed almost evenly ( 54:46)
with Myntra getting larger share of the pie, in an infinitely repeated game Myntra will be worse
off with just 32.4% of the pie.
Theories suggest that Price war games can be fought better if players can foresee trends and
invest before hands in improving their cost structure, building stronger infrastructure and
working on innovation. Keeping this theory in mind, let us find out how can (D+BP, D+BP) be
the Nash Equilibrium.
Let us assume that “a” is the benefit or the return that Jabong expects by investing in future
while “b” is the benefit that Myntra expects by investing in the future the new game can be
written as
Myntra
Discount Discount+ Back Up No Discount Collude
Discount 125.67, 146.5 171.4, 100.7b 238.83, 33.33 238.83, 24.86
Discount+ Back Up 88.08a, 184.08 106.71a, 127.55b 179a, 54.76 179a, 46.43
Jabong No Discount 26.875, 245.29 42.14, 192.12b 62.5, 83.3 62.5, 75
Collude 20.625, 245.29 35.89, 192.12b 56.23, 83.3 58.33, 58.33
(D+BP, D+BP) will be the Nash equilibrium if the following conditions are satisfied: -
A= (171.4/106.71)=1.606222 B= (184.08/127.55)=1.44
This means that if Myntra sees 44% more benefit from investing in future and Jabong sees
60.62 % more benefit in future the equilibrium can be shifted to D+BP, D+BP
The new game would be: -
Myntra
Discount Discount+ Back
Up
No Discount Collude
10. Game Theory Term Paper – “E-Commerce Discount Wars (Myntra Vs. Jabong)”
9 | P a g e
Discount 125.67, 146.5 171.4, 145.33 238.83, 33.33 238.83, 24.86
Discount+ Back
Up
141.4761, 184.08 171.14, 184.08 287.51, 54.76 287.51, 46.43
Jabong No Discount 26.875, 245.29 42.14, 277.27 62.5, 83.3 62.5, 75
Collude 20.625, 245.29 35.89, 277.27 56.23, 83.3 58.33, 58.33
Conclusion
So the best option for Myntra is to avoid price war and signal Jabong that it is ready to compete
on other parameters like Variety, No of vendors, Quality of vendors acquired and Customer
Service. In the hindsight, given that Jabong is highly unpredictable player, Myntra should build
up a superior cost structure and capabilities so that it can combat future price wars more
effectively.
*No. Of Words: (2752-593-50-50-50-50-25) =1934
Bibliography
Margaret E. Slade, “Price Wars in Price Setting Super games”, The London School of Economics
& Political Science
Rohin Dharma Kumar, “Myntra's Big Leap Forward“, Forbes India
Robert C. Blattberg, Gary D. Eppen & Joshua Lieberman, “A Theoretical & Empirical Evaluation
of Price Deals for Consumer Non-Durables”, American Marketing Association
Tarek H. Selim, Strategic Pricing: A Game in Market Economics, American University, and Cairo,
Egypt
Jubin Mehta, Can Game Theory help Indian E-Commerce Company Escape the Ridiculous Price
Wars, Yourstory.in