Fashion Industry and the Prisoners’ Dilemma
The fashion industry is notoriously known as being a volatile and temperamental market. With designers releasing a new collection every half year and fashion shows occurring even more frequently, it can be hard for high and fast fashion stores to keep with the everchanging tides of fashion trends. Many retailers like H&M are struggling to stand out and maintain a unique brand whilst satisfying their consumer base. In fact, these stores have to constantly compete with each other in pricing, diversity of products, and discounting strategies to increase yearly consumer acquisition and retention. Introducing game theory may allow fast-fashion retailers to determine the best strategy in situations where it is faced with competing strategies in the industry.
In the past, fashion was largely a supply-led market, meaning brands and retailers put the products they wanted into stores, on schedules they chose. However, due to the increasing accessibility to a wealth of information on the internet, demand, not supply, has become the controlling force of the fashion market. This change in consumer mentality has pressured retailers to find an effective strategy to provide with their consumer’s exponential increasing appetite for newness, as they are often faced with large and costly amounts of overstock. By dedicating discount days, such as Black Friday or semi-annual sales, retailers are able to generate a return on capital on their overstock products. 
(Source: https://www.mention-me.com/blog/black-friday-analysis-an-insight-from-100-brands)
These discounting strategies, particularly month-long reductions and pre-sale events, have trained customers to expect sales outside of the allocated period, making it even more challenging to sell at full price and diminishing the impact of these events. In an effort to impede this mentality, several retailers have begun to take action against heavily discounting products around a specific time frame. However, the concept of the Prisoner’s Dilemma occurs in this situation.
A standard example in Game Theory, the prisoner’s dilemma is a paradox in decision analysis in which two individuals acting in their own self-interests do not produce the optimal outcome. The typical prisoner’s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant (Chappelow, 2019). This theory is very applicable to the fashion industry: although most retailers want to be rid of the current discounting strategies, few are confident enough to make the first move in not providing discounts on a specific date. The phenomenon happens because competing retailers are distrustful that others will follow suit if they “boycott” the discounting strategy and anticipate that competitors will instead lower their prices to increase the payoff for the fiscal year.
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