4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of advertising. They have two choices - advertise (A) or don't advertise (DA). Remember advertising costs money and hence reduces profits. Decisions are made independently without communication between the 2 firms. The table below gives the payoff (profits in thousands of dollars) for each firm in the order (Coca Cola, Pepsi). Coca Cola DA A Pepsi DA (50, 50) (75,0) A (0,75) (25, 25) Assuming the game is only played once, what is the best move for each player? What is the Nash equilibrium of the game?

4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of advertising. They have two choices - advertise (A) or don't advertise (DA). Remember advertising costs money and hence reduces profits. Decisions are made independently without communication between the 2 firms. The table below gives the payoff (profits in thousands of dollars) for each firm in the order (Coca Cola, Pepsi). Coca Cola DA A Pepsi DA (50, 50) (75,0) A (0,75) (25, 25) Assuming the game is only played once, what is the best move for each player? What is the Nash equilibrium of the game?

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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Question

G.85.

4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of
advertising. They have two choices - advertise (A) or don't advertise (DA). Remember
advertising costs money and hence reduces profits. Decisions are made independently
without communication between the 2 firms. The table below gives the payoff (profits in
thousands of dollars) for each firm in the order (Coca Cola, Pepsi).
Coca Cola
DA
A
Pepsi
DA
(50, 50)
(75,0)
A
(0,75)
(25, 25)
Assuming the game is only played once, what is the best move for each player? What is
the Nash equilibrium of the game?

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