Watchmen, Lego, Prisoners and Pricing

Reading the papers in a leisurely fashion on the train to visit the ICIS Heren offices in Holborn, central London, I see that there are chemicals galore in the news today.

 

The first reviews for the long-awaited film of “Watchmen” are out, and being a dark and grisly tale of super-heroes battling the forces of evil, there is plenty of Spandex on display.

 

 


Watchmen Patrick Wilson as Nite Owl Malin Akerman as Silk Spectre Jackie Earle Haley as Rorschach.jpg

(Watchmen Patrick Wilson as Nite Owl II, Malin Akerman as Silk Spectre II, Jackie Earle Haley as Rorschach)

 

In a year in which Lego’s brightly coloured plastic bricks won construction Toy of the Year, profits have proved resilient in a market where parents have been falling back onto good value, practical toys. Despite the evidence all around that children prefer Playstations, Wii and mobile phones, parents are defiantly buying Lego, particularly the Star Wars themed sets.

 

I was impressed with this excruciating introduction:

 

“Mr Knudstorp, a former management consultant, has been quietly dismantling Lego and rebuilding its blocks into a sounder structure.”

 

 


lego bricks.jpg

 

Bearing in mind the rate at which chemical prices have fallen in the last few months, this piece on “The Prisoner’s Dilemma” shows plainly the sheer inevitability of downward price spirals:

 

“The scenario is that two suspects are held by the police who do not have enough evidence for a successful conviction and hope to convince one or other to break ranks and testify against his fellow inmate. The police separate the suspects and make both the same offer.

They are told that if one of them testifies against the other and the second remains silent, then the betrayer will be freed but the silent accomplice will get a ten-year term in jail.

If both keep silent they will both serve just six months on a reduced charge but if each betrays the other they will go down for five years apiece.

The dilemma is that each is better off confessing than remaining silent but if both confess, the outcome is less good than if both had remained silent …

The most obvious parallel in business is pricing. Does one player (or retailer) betray a competitor by reducing prices in the hope that the competitor will go out of business? And does the competitor follow suit, so that both make less money?

Even if the competitor believes his product reflects value for money at its current price, his dilemma is whether to maintain the price and risk losing market share, or cut the price and his profits.”

 

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