Everyday Low Pricing Strategy

Game Theory Application on Pricing Strategies

High-Low Pricing and the Everyday low pricing (EDLP) are the most accepted pricing strategies used by firms in the retail supermarket business. In this research, the two pricing approaches are looked into using a game-theoretic structure and compared to the experimental behavior of superstores within the industry. Below are the definitions of the two strategies of pricing of the products. The definitions will serve the purpose of making sure that we understand the context of the research and the imminence of these two approaches to the retail sector.

Everyday low pricing strategy

Everyday low pricing (EDLP) is a price setting strategy that gives the consumers with small prices with no need of using

Additionally, the EDLP arrangement adequately meets the requirements of a growing population of time-constrained customers. When the famous Wal-Mart supermarket entered the country of Canada in 1994, they productively surpassed the Hudson Bay Company. And its Zellers procession to become Canada 's leading retailer. Canada 's vendors used High-low pricing strategy, using loss leaders, weekly fliers, and specials to draw consumers. So to contend with Wall-mart and other stores, Canadian traditional and discount stores are sponging some of the U.S. giant firms ' strategies, including day by day pricing (Easley, David, and Jon, 229). Captivatingly, EDLP chains in the United States are implementing some of HLP attributes to fight with

In game theory, the procedure of contending chains is best illustrated as a non-cooperative game. Every store concurrently and independently chooses its price promotions advertising, and in-store advertising and vending. Additionally, due to the environment of the supermarket industry, chain stores are engulfed in a game where there is "approximately perfect information". To actualize the game, a framework is built up to provide conjecture of the strategies of inculcating EDLP and HDLP to increase the revenue and profit-earning of supermarkets. For ease, a market will comprise of two supermarkets (one HLP store and one EDLP store), each carrying a definite product both allocated to two kinds of customers: The cherry selectors (clients with low opportunity costs and little price predilection) and the time-restrained consumers. According to (Easley, David, and Jon, 234), stability is reached at that time when each store serves the cherry pickers and time restrained consumers equally. Time-constrained customers will be fascinated to the HLP because it gives a better and individual service, plus, HLP store provides a vast assortment of merchandise. Likewise, cherry pickers will also be engrossed to HLP because of merchandise promotion. Conversely, EDLP stores draw the time constrained clients because of their well-situated locations and lower holder prices and it also brings cherry pickers due to lesser basket prices and the necessity for high-level service (Fine, Allison,