When Ben & Jerry’s and Haagen Dazs were first created, there was an indivisible line drawn between Haagen Dazs and Ben & Jerry’s being that Haagen Dazs would only make smooth ice creams and Ben & Jerry’s only chunky. But this only lasted when sales were good. At one point, ice cream sales started to plummet and Haagen Dazs crossed that invisible line into chunky town which caused Ben & Jerry’s to dabble in the smooth ice cream market. This led to more options for consumers and Hagen Dazs even went so far as to reduce their chunky ice cream flavors prices below Ben & Jerry’s. There was a famous line said by Ben & Jerry’s during this time “When the smooth go chunky, the chunky go smooth”.
This is an example of game theory; in which individuals not only look at one’s own strategies but their competitors as well. To find Nash Equilibrium, or the best outcome possible for both companies, they could a) wait and hash it out to see which company was the strongest competitor by producing both types of ice cream or b) agree to not cross that indivisible line and produce what each company was specialized in (Ben & Jerry = chunky and Haagen Dazs = smooth). This led to a specific type of game called Prisoner’s Dilemma. In Prisoner’s Dilemma, individuals could either cooperate or betray the other player. They have an incentive to betray if they betray and the other does not, they get a higher utility (outcome) than if they were to both cooperate. If they both betray, then they end up worse overall. I’ve created a model of a possible game for Haagen Dazs and Ben & Jerry’s just to model out and see why the companies might want to step into the others’ territory. Regarding the market, it creates more competition and lower prices for consumers. However, it leads to less profit for producers.
Eventually, Ben and Jerry’s only made chunky flavors and Haagen Dazs smooth. After the war, prices for pints of ice cream for Ben and Jerry’s and Haagen Dazs were 20-50% higher. When they didn’t step into each other’s territory they were able to monopolize in their individual field (chunky and smooth) to increase the prices for maximum profit. This is a good example of collusion, in which companies can work together to control the market. Collusion is a very powerful tool that all industries face, not just the premium ice cream market. Price matching, synchronized advertising, and sharing of private information are all tactics that companies in an industry will use to manipulate the market. Ben & Jerry’s and Haagen Dazs have been able to collaborate to combat inflation, other competitors, and other changes to the market (like COVID-19) to stay in control of the premium ice cream market.
A little fun fact into the marketing of Haagen Dazs: The company started out in New York (not Europe as people commonly assume) and the more European name was decided for the company to seem more attractive and luxurious to American consumers.
Aronczyk, Amanda , Robert Smith, Willa Rubin, Alyssa Jeong Perry, and Jess Jiang. 2023. “The Ice Cream Conspiracy : Planet Money.” NPR. February 8, 2023. https://www.npr.org/2023/02/06/1154775118/ice-cream-ben-jerrys-haagen-daz.