Minority Game of price promotions in fast moving consumer goods markets
✍ Scribed by Robert D. Groot; Pieter A.D. Musters
- Publisher
- Elsevier Science
- Year
- 2005
- Tongue
- English
- Weight
- 484 KB
- Volume
- 350
- Category
- Article
- ISSN
- 0378-4371
No coin nor oath required. For personal study only.
✦ Synopsis
A variation of the Minority Game has been applied to study the timing of promotional actions at retailers in the fast moving consumer goods market. The underlying hypotheses for this work are that price promotions are more effective when fewer than average competitors do a promotion, and that a promotion strategy can be based on past sales data. The first assumption has been checked by analysing 1467 promotional actions for three products on the Dutch market (ketchup, mayonnaise and curry sauce) over a 120-week period, both on an aggregated level and on retailer chain level.
The second assumption was tested by analysing past sales data with the Minority Game. This revealed that high or low competitor promotional pressure for actual ketchup, mayonnaise, curry sauce and barbecue sauce markets is to some extent predictable up to a forecast of some 10 weeks. Whereas a random guess would be right 50% of the time, a singleagent game can predict the market with a success rate of 56% for a 6-9 week forecast. This number is the same for all four mentioned fast moving consumer markets. For a multiagent game a larger variability in the success rate is obtained, but predictability can be as high as 65%.
Contrary to expectation, the actual market does the opposite of what game theory would predict. This points at a systematic oscillation in the market. Even though this result is not fully understood, merely observing that this trend is present in the data could lead to exploitable trading benefits. As a check, random history strings were generated from which the