This paper deals with the question whether the framework of the prisoners’ dilemma applies to the context of pricing in the German discounter fitness industry. It addresses the issue of the prisoners' dilemma and possible solutions. Furthermore, the author assesses the German discounter industry as well as current trends within the industry. The concept of the prisoners' dilemma is applied to the German discounter fitness industry to demonstrate that the pricing strategies of McFit and FitX, Germanies leading players in the discounter fitness segment, can be modelled using the game-theoretical approach. Lastly, a possible solution can be explained by the repetitive nature of the "game".
The fitness industry in Germany developed remarkably in the last one and a half decades. Between 2003 and 2017, the number of active members rose from 4.38 million to 10.61 million making it the most popular sport in Germany concerning members. The main reason for the enormous increase in members is the rising health awareness among the German population. Society further agrees that becoming active and working out has a positive impact on well-being, health, and mobility especially for older adults.
Increasing demand fosters rivalry within the industry as all competing firms want to benefit from the high demand and bind potential customers to long-term contracts. The high interest on the consumer side can result in price wars as the rewards immediately gained from cutting the price are high. Even though price cutting may be beneficial in the short run, the long-run consequences of price wars are decreasing profits within the industry.
The fight on prices seems especially present in the discounter chain segment as gyms are homogenous, and differentiation amongst the competitors in this segment is somewhat limited. Thus, competing on price could be the instrument chosen by firms engaging in the discounter fitness sector to attract new members, increase market share, and raise short-term income while simultaneously putting long-term profitability at risk.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Motivation and Problem Definition
- Course of Investigation
- Research Question and Objectives
- Theoretical Background
- The Prisoners' Dilemma
- The Application of the Prisoners' Dilemma in Pricing
- Example: T-Shirt Retailer
- Example: Two Restaurants
- Price Wars as a Consequence of Price Cutting
- The American Airline Industry as an Example
- Solving the Prisoners' Dilemma According to Theory
- Rewards Approach
- Repeated Games
- Finite Repetition
- Infinite Repetition
- General Theory
- The German Fitness Industry
- General Development Within the Industry
- Market Characteristics of the Chain Segment
- Porter's Five Forces
- Defining the Target Firms
- McFit
- FitX
- Application of the Prisoners' Dilemma to the Fitness Industry
- Rebuilding the Prisoners' Dilemma
- Assumptions for the Model
- Mutual Cooperation
- Unilateral Defection of FitX
- Unilateral Defection of McFit
- Mutual Defection
- The Applicability of the Prisoners' Dilemma
- Solving the Pricing Dilemma of FitX and McFit
- Rewards Approach as a Solution
- Repetition as a Solution
- Does Defecting Pay Off for FitX
- Does Defecting Pay Off for McFit
- Outcome and Implication
- The application of game theory to analyze competitive pricing strategies in the fitness industry.
- The role of the Prisoners' Dilemma in understanding the pricing behavior of McFit and FitX.
- The factors influencing the decision-making process of fitness chains regarding pricing strategies.
- The implications of the Prisoners' Dilemma for the long-term sustainability of pricing strategies in the fitness industry.
- The potential solutions to the pricing dilemma faced by fitness chains.
- Introduction: The introduction sets the stage for the thesis by defining the motivation for the research, the research question, and the objectives. It outlines the course of investigation and highlights the importance of understanding the pricing dynamics within the German discounter fitness industry.
- Theoretical Background: This chapter introduces the fundamental concepts of the Prisoners' Dilemma and its application to pricing strategies. It explores various examples, including T-shirt retailers, restaurants, and the American airline industry, to illustrate how the Prisoners' Dilemma can be applied to real-world scenarios.
- The German Fitness Industry: This chapter provides a comprehensive overview of the German fitness industry, examining its general development and the market characteristics of the chain segment. It analyzes Porter's Five Forces and defines the target firms McFit and FitX.
- Application of the Prisoners' Dilemma to the Fitness Industry: This chapter explores the application of the Prisoners' Dilemma to the specific context of the German discounter fitness industry. It rebuilds the game, considering different scenarios such as mutual cooperation, unilateral defection, and mutual defection. The chapter analyzes the applicability of the Prisoners' Dilemma and investigates potential solutions to the pricing dilemma.
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis aims to apply the theoretical framework of the Prisoners' Dilemma to the German discounter fitness industry. It investigates the pricing behavior of two major fitness chains, McFit and FitX, and analyzes whether the Prisoners' Dilemma provides a valid framework to understand their competitive dynamics.
Zusammenfassung der Kapitel (Chapter Summaries)
Schlüsselwörter (Keywords)
The key themes and concepts explored in this thesis include: Prisoners' Dilemma, game theory, competitive pricing strategies, discounter fitness industry, McFit, FitX, pricing dynamics, rewards approach, repeated games, and the German fitness market. The thesis utilizes a theoretical framework to analyze the pricing behavior of fitness chains and provides insights into the factors influencing their decision-making process.
- Citation du texte
- Moritz Moerke (Auteur), 2018, Pricing Strategies in the German Discounter Fitness Industry. The Prisoners’ Dilemma, Munich, GRIN Verlag, https://www.grin.com/document/943445
