I will get to the best thing eventually…in the meantime:
From Mind Your Decisions:
Handbag companies were not happy to see reality star Snooki on Jersey Shore vomit in their handbags and defile their brands.
And so, they fought back in an interesting way. Via NBCPhiladelphia:
Well, it ends up that fashion powerhouses like Gucci and Coach have been allegedly sending the “Jersey Shore” train wreck [Snooki] expensive designer bags.
The kicker: Coach is not sending [Snooki] Coach bags. They’re sending her Gucci bags, and any other competing designer product they can put into her Guido-grabbing hands.
Who knew the strategies of Game Theory would come so naturally to the fashionistas who think a $5,000-price tag for a handbag is a reasonable marketing move?
This is fantastic. Also, since I understand the power of incentives, I am now going to make it a habit to behave badly in public places so that I too can be on the receiving end of the spoils of corporate sabotage.
That said, I really don’t think that this is what Adam Smith had in mind when he wrote about how the profit motive and competition were good for the economy, and, in fact, this sort of behavior is not particularly good for the economy. Presh over at Mind Your Decisions seems to get this:
On closer analysis, the game is not good for the companies. The brand war is a type of Prisoner’s dilemma.
The best outcome is if no one sent Snooki a handbag. Yet each company is motivated to send a competitor’s handbag–regardless of what the other does–and so each sends a handbag as a dominant strategy. Ultimately both pay for handbags and both brands get shown negatively on TV.
In spite of the clever strategies, the losers of this “unbranding game” are the companies. The clear winner of the is Snooki. Ironic, isn’t it?
Dear Presh: You say ironic, I say inefficient. 🙂 This example highlights that, while our economics textbooks point out that competition among firms drives economic efficiency, it is important to distinguish good competition from bad competition. In general, competing by making your product better (without increasing cost) or cheaper (without sacrificing quality) is good competition. Competing by making your competitor’s product worse is bad competition. We can also, in a way, put advertising in the bad competition category if the advertising is of a persuasive rather than an informational nature. Under this framework, the following is an example of bad competition:
It’s certainly not economically efficient for Barney to destroy useful capital by shooting Homer’s tires, and society would have been better served if Barney had instead concentrated his efforts on adding to his plowing value proposition. Maybe if he had followed that approach Homer wouldn’t have stranded him on Widow’s Peak as retaliation and customers’ driveways would have actually gotten plowed in a timely fashion.
The more I watch, the more I feel like Homer and I are kindred spirits in some ways. In the above clip, for example, he has no trouble jumping out of bed at 7am to pursue his entrepreneurial venture even though he often has trouble showing up to his job at the power plant on time. I can certainly commiserate on this point.