Pizza Wars!

 

Following in the footsteps of Cola Wars, presenting Pizza Wars from Manhattan! Here is a great article( download pdf here:  Download Pizza) from the NYT that illustrates price competition between two neighboring pizza joints in Manhattan. The outcome is very different indeed from what we saw in the rivalry between Coke & Pepsi - the firms are slowly sinking into a price war with prices falling by 50%. Why do you think outcomes are so different here when compared to the Cola wars case?

Is there any way out of the price war for these guys? It looks like at least one of the two firms seems to recognize that the situation needs to be rectified:

For his part, Eli Halali made it clear that 75 cents was a temporary price point. He said he could not make money at that level and eventually would return to $1. He said that if Bombay/6 Ave. Pizza went back to $1, he would as well.

However, that is easier said than done. In fact, things could take a turn for the worse

“We might go to free pizza soon.”

Eli said: “We have enough power to wait them out. They’re not going to make a fool of us.”

A classic case of rationality taking a backseat to emotion (Escalation of commitment, maybe?)

Note how the history of interactions plays a key role - when we discussed the interactions between Coke & Pepsi, we made a note of how they understood each other's strengths and weaknesses very well based on their long history of competing against each other. That clearly doesn't hold here!

Any thoughts on what these firms can do to get out of this competitive death spiral?

 

 

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