Wal-Mart and Amazon: What's the deal?

Hmmm...looks like Wal-Mart is at it again. The below article assesses the strategy behind the recent price war between Amazon and Wal-Mart. Clearly, as two major giants in their respective industries, the payoffs of the price war way outweigh the costs of "sparring". The strategy, as is common in most businesses isn't necessarily to gain customers by reducing the prices of a couple of books, but to lure the consumer and cause them to unconsciously purchase those items that they really don't need. This strategy reminds me of the departmental store Macy's and the ploy they use in getting customers into their stores. The coupons they send in the mail isn't necessarily for me to get $10 off a $30 item, but to get me into the store, entice me with the elaborate display of items that if left in their standard form would not necessarily appeal to me, and create an illusion for me that getting these items is mandatory for my survival. So, where is the game theory? In Macy's, it is in their use of the cognitive and behavioral phenomenon of us humans. We all have an innate desire to acquire material goods and these stores know it, so they capitalize on this knowledge.

In the article below, the strategy is in the price competition. Of course, Wal-Mart and Amazon’s ploy may not necessarily be to engage in a price war….there are only 10 books that are in question here, but this move will hurt not only the publishers, the authors, and if care is not taken, the book retail industry. Is there a way that these industry giants can figure out a way to be Pareto efficient between themselves and between the authors? For the new kids on the block, that would be virtually impossible, but for veterans like Daniel Steels, maybe there could be a sliver of hope. Whatever the decision would be though, the first thing that would need to occur would be a discussion. The issue of trust and value of fairness will have to be addressed earlier in the discussions and some level of compromise will have to be met. There is a point where both parties can maximize their profits, whether by exploring mixed strategies or through some other means, but one thing is for sure, cooperation and collaboration is key for the good of all involved. http://www.newyorker.com/talk/financial/2009/11/09/091109ta_talk_surowiecki