When McDonald's Corporation reduced the price of its Big Mac by 75 percent if customers also purchased french friesand a soft drink. The Wall Street Journal reported that the company was hoping the novel prWomotion would revive its U. S. sales growth. It. didn't. Withing two weeks sales had fallen. Using your knowledge of game theory, what do you think disrupted McDonald's plans?
Based on the given information, it is suggested that game theory can be used to analyze the situation and determine what disrupted McDonald's plans. Game theory is a mathematical framework used to model and analyze the interactions and strategies of multiple participants in a situation.
In this case, McDonald's planned a promotion where they reduced the price of the Big Mac by 75 percent if customers also purchased french fries and a soft drink. This pricing strategy was likely intended to increase the overall value proposition for customers and encourage them to make additional purchases, thereby boosting McDonald's sales.
However, the fact that sales fell within two weeks suggests that something unexpected occurred. To apply game theory to this scenario, we need to consider the potential strategies and reactions of multiple players.
In this case, the key players are McDonald's and its customers. McDonald's implemented a pricing strategy, and customers had the choice to accept or reject it. In game theory, players typically make decisions based on their own self-interest and the anticipation of how other players will act.
Several potential factors could have disrupted McDonald's plans:
1. Demand Elasticity: McDonald's might have overestimated the demand elasticity for the Big Mac. If customers were not as responsive to the price reduction as anticipated, the promotion might not have been attractive enough to significantly increase sales.
2. Complementary Goods: The requirement to purchase french fries and a soft drink as part of the promotion might have deterred some customers. If they didn't want or need these additional items, they might have opted not to participate in the promotion, leading to a negative impact on sales.
3. Substitution Effect: Customers might have substituted their regular purchases, such as other menu items, with the heavily discounted Big Mac. This could have resulted in decreased sales of other products, offsetting the intended boost in overall sales.
4. Duration of Promotion: Even though the promotion had an initial impact, its effectiveness may have diminished over time. Customers could have taken advantage of the discounted price early on, but then sales dropped as the novelty wore off.
To determine the exact factor that disrupted McDonald's plans, more information would be needed, such as sales data, customer feedback, and competitor actions. Analyzing this data, applying game theory principles, and considering the potential strategies and reactions of both McDonald's and its customers could provide a more precise answer to the question.