The Pizza Bargaining Problem

Imagine a pizza shop that makes “take n bake pizzas” to be distributed at a local grocery store. The pizza store owner wants to introduce some new types of pizza and tries to discuss raising the price of the existing pizzas With the grocery store owner. The system functioned for a relatively short time an introductory price, and the pizza shop owner is ready to establish a new pricing system.

But the grocery store owner has a complaint-namely their customers. They are already used to the price for the product and will allegedly be quite upset with new prices says the grocery store owner.

Provided the price increase IS somewhat justified from the pizza maker’s position vs. what the customer might or should pay I think I see a solution for this bargaining problem.

The pizza store owner might introduce the concept of coupons to the grocery store owner.

The pizza store owner explains to the grocery store owner they can give the coupons to all the upset regular customers that buy the product, while any NEW customers trying the pizza for the first time will be unaware of the price increase, and so cannot be expected to complain about it.

Although this seems to perfectly deal with the grocery store owners complaint one might point out the grocery store owner might smartly play a different strategy with the coupons…

They could distribute the coupons to all new customers attracting new buyers for the product, especially if they think regular customers won’t actually be affected that much by a price increase.

Perhaps they might even selectively choose which regular customers get a discount for some period of time (there are likely to be only 1 round of a finite number of coupons), thus maximizing the price change between the two parties and sales and profits.


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