Chivalry isn't dead
Regarding the theft of Coca Cola intellectual property and its attempted sale to arch-rival Pepsico, we learn
PepsiCo was offered a new product sample and confidential documents in May, in a letter from someone calling himself ‘Dirk’. But instead of taking the bait it tipped off Coca-Cola, which brought in the FBI.
[…]
Coca-Cola’s chairman and chief executive Neville Isdrell, said: “I would like to express our sincere appreciation to PepsiCo for alerting us to this attack.”
Dave DeCecco, a PepsiCo spokesman, said: “Competition can sometimes be fierce, but also must be fair and legal.”
Tit for Tat as an evolutionarily stable strategy?
So what’s interesting about this is that Pepsi knows what’s in Coke. (Or could if they wanted to.) There’s all sorts of knock-offs which taste indistinguishable. So its a free favor from Pepsi.
How does this count as tit-for-tat? I guess large companies often receive shady offers from various sources. Some of these will be from competitors trying to mislead. Some of these will be from journalists testing their reaction, looking for a good story. It doesn’t seem a clever idea to take the bait unless you can verify and trust the source. But where is the game theory? Are you implying that this is part of an ongoing n-person game?
Look at external costs&benefits to resolve — the chance that this would be an entrapment or would otherwise go sour on Pepsi is quite high. There’s a simple economic equation here. Get some boring formulas or marketing plans, or get indicted for industrial espionage. I know which I’d pick.
Also, consider the cartel aspects, what’s the point in shaking up a cozy arrangement here? Competition isn’t the point in a cartel, only the perception of competition.
@Adam:
If they all taste the same, the zeal with which Coke guards its IP is irrational. I suspect Coke/Pepsi have darn good info on how their customers perceive the “drinking experience”. Not being one of those customers, I agree with you, BTW ;^)
@Ian:
You’re right – “If it sounds too good to be true..”. However, there’s a big difference between saying “No thanks”, and saying “No thanks” and then tipping off Coke that their IP may have been misappropriated.
Let’s say it was, in fact, a real offer: If I am Pepsi, I might prefer that they not learn about it on the theory that whatever distracts or hurts them helps me. OTOH, maybe alerting them is a kind of signal — “Look at me, I’m honest and fair, and I have an inside track to your IP. Please play nice”.
The cartel aspect is a good one — like Adam, I think all these things taste the same, so w/virtually zero barriers to entry, I implicitly rejected that notion. There may be something to it.
@Richard — I consider society to be a set of simultaneously-occuring N-person iterated games with various payoff matrices, at least as a first approximation.
I threw the ESS line in there as a semi-joke. The thought was that even in situations of ruthless competition for a finite pie (http://www.cwalsh.org/blog/archives/001324.php), we have evidence of behavioral norms of fair play. I believe those norms to have been emergent from the system of interaction, not to have been imposed, but there isn’t evidence of that in this one story. The ESS throw-away is meant to hint at the emergence, and also to be a sort of self-deprecating acknowledgment of my reductionist tendencies.
As far as “it could have been a set-up”, consider what the spokesman for Pepsi said. They don’t do just what is legal, they do what is fair. The fairness part caught my eye because they could have stopped at legal, and let Coke potentially twist in the wind when another buyer was found. Going the extra mile, by Pepsi’s evaluation, clearly has a payoff.
There is some interesting analysis on the Freakonics blog that essentially agrees with Ian: http://feeds.feedburner.com/FreakonomicsBlog?m=456
I think Pepsi also benefits by going the extra mile to help trap the corporate spies. It puts their own employees on notice that crime doesn’t pay.
Nick