Travis Roach
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Pizza Theory

4/3/2012

 
Actually, it's game theory about pizza. In this article from the NY Times the story of three pizza sellers in New York is told. This type strategic business behavior, or game, is known as a Bertrand pricing game. The basic gist is this; each player's dominant strategy is to be the low cost pizza provider. So, as you would assume, the lowest price possible prevails. This is great for us consumers, but what about the producers? What is happening to consumer and producer surplus as the Bertand game plays out? Do you think it is fair for the pizza sellers to keep slashing their prices? What if this was Dominos vs. a local pizza seller, would you still think it was fair?
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