When McDonald's Corp. reduced the price of its Big Mac by 75 percent if customers also purchased french fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U. S. sales growth. It didn't. Within two weeks sales had fallen. Using your knowledge of game theory, what do you think disrupted McDonald's plans?
To analyze what might have disrupted McDonald's plans using game theory, we need to understand the concept of strategic interaction among players. In this scenario, McDonald's is the player implementing a promotion, while the customers are the players making decisions about whether to purchase the Big Mac, fries, and a soft drink.
We can apply the concept of the prisoner's dilemma from game theory to this situation. The prisoner's dilemma refers to a game where two individuals face a decision to either cooperate or act selfishly. In this case, McDonald's is offering a discounted price on the Big Mac, fries, and a soft drink, hoping that customers will make a cooperative choice by purchasing all three items.
However, customers also have their own self-interests in mind. They might have preferred to buy just the discounted Big Mac and skip purchasing the fries and soft drink at the regular price. This creates a conflict, as customers need to weigh the benefits of taking advantage of the lower price against their individual preferences.
It is possible that customers did not perceive the discounted price as significant enough to motivate them to purchase all three items. They might have opted to buy the discounted Big Mac alone and forego the additional items. This choice by the customers would be individually rational but would result in lower overall sales for McDonald's, as the promotion was designed to increase sales volume.
Another factor that could have disrupted McDonald's plans is consumer response to the promotion. Customers may have interpreted the promotion as a temporary or desperate measure by McDonald's to boost sales. This perception might have eroded customers' trust in the brand or made them question the quality of the products, leading to a decrease in sales instead of the intended growth.
To further analyze the situation, it would be helpful to gather more information on customer perceptions, preferences, and competitors' actions. This would provide a more comprehensive understanding of the factors that disrupted McDonald's plans using game theory.