Game theory modelling of retail marketing discount strategies

Abstract

Purpose The purpose of this paper is to use the game theory combined with Monte Carlo simulation modelling to support the analysis of different retail marketing strategies, in particular, using payoff matrices for modelling the likely outcomes from different retail marketing strategies. Design/methodology/approach Theoretical research was utilised to develop a practical approach for applying game theory to retail marketing strategies via payoff matrices combined with Monte Carlo simulation modelling. Findings Game theory combined with Monte Carlo simulation modelling can provide a formal approach to understanding consumer decision making in a retail environment, which can support the development of retail marketing strategies. Research limitations/implications Game theory combined with Monte Carlo simulation modelling can support the modelling of the interaction between retail marketing actions and consumer responses in a practical formal probabilistic manner, which can inform marketing strategies used by retail companies in a practical manner. Practical implications Game theory combined with Monte Carlo simulation modelling can provide a formalised mechanism for examining how consumers may respond to different retail marketing strategies. Originality/value The originality of this research is the practical application of game theory to retail marketing, in particular the use of payoff matrices combined with Monte Carlo simulation modelling to examine likely consumer behaviour in response to different retail marketing approaches.