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Business
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| Number of pages / Number of words: |
3 / 653 |
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Lastly, where people might not find the price increase justified, they would find the price decrease in cooler weather justified which would make them more comfortable with the new vending machines.
Prospect theory reinforces the idea that Coke would have been successful with its new pricing strategy if it focused on the benefits to customers, namely lowering pricing in cooler weather instead of putting emphasis on raising prices in hotter weather...
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Prospect theory explains that customers would not be willing to spend more when the temperature rises because they are not as willing to be risky to improve their position (relieve thirst).
Using game theory, it would make sense for both companies to use the new machines to maximize their profits. Pepsi took a stand and said its pricing would remain constant regardless of temperature, but the company could increase its pricing and keep it constant in order to catch up with Coke's fluctuating prices due to the weather...
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