Game Theory
Why Do Supermarkets Price Match? (Game Theory) 1 Why do Supermarkets Price Match? Do you have a price match card at your supermarket? Have you heard them offer to refund your money if you can buy it cheaper elsewhere? Why do they do it – are they being nice to their loyal customers? Actually, no. Actually, the price match promise is not even aimed at their customers, it is sending a message to their competitors. To understand why, we need to look at something that economists call ‘Game Theory’ (don’t get excited, Pictionary and Cluedo do not feature.) Game Theory is something that John Nash made a big contribution to (you may have heard of him – he was the person who inspired the film A Beautiful Mind. ) He showed that when individuals (you and me) or companies (Sainsbury’s) make a decision, we do not just take into account the things that will benefit us, the things that we want. We also take into account other people and compet...