19) The soft-drink industry is dominated by Coca-Cola and Pepsi and each firmspends a lot of money on advertising. Suppose each firm is considering a costlytelevision commercial during halftime of the Super Bowl. The table shows thepayoff matrix of profits that each firm would receive from their advertising decision,given the advertising decision of their rival. Profits in each cell of the payoff matrixare given as (Coke, Pepsi). If each firm makes the decision to advertise on theSuper Bowl independently, what is the Nash equilibrium of this game?Table: Coke and Pepsi Advertising GamePepsiSuper Bowl AdNo Super Bowl AdSuper Bowl AdNo Super Bowl Ad$800, $700$1,500, $600Coke$650, $900$1,000, $800O A. Both firms advertise during the Super Bowl.O B. Neither firm advertises during the Super Bowl.C. Pepsi advertises, but Coke does not advertise during the SuperO Bowl.OD. Coke advertises, but Pepsi does not advertise during the Super Bowl.

During the Super Bowl, let us assume, Coke is advertising, then it is better for Pepsi to advertise.…

Answered: Table: Coke and Pepsi Advertising Game…

Table: Coke and Pepsi Advertising Game Pepsi No Super Bowl Ad Super Bowl Ad Super Bowl Ad No Super Bowl Ad $800, $700 $650, $900 Coke $1,500, $600 $1,000, $800

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

19) The soft-drink industry is dominated by Coca-Cola and Pepsi and each firm
spends a lot of money on advertising. Suppose each firm is considering a costly
television commercial during halftime of the Super Bowl. The table shows the
payoff matrix of profits that each firm would receive from their advertising decision,
given the advertising decision of their rival. Profits in each cell of the payoff matrix
are given as (Coke, Pepsi). If each firm makes the decision to advertise on the
Super Bowl independently, what is the Nash equilibrium of this game?
Table: Coke and Pepsi Advertising Game
Pepsi
Super Bowl Ad
No Super Bowl Ad
Super Bowl Ad
No Super Bowl Ad
$800, $700
$1,500, $600
Coke
$650, $900
$1,000, $800
O A. Both firms advertise during the Super Bowl.
O B. Neither firm advertises during the Super Bowl.
C. Pepsi advertises, but Coke does not advertise during the Super
O Bowl.
OD. Coke advertises, but Pepsi does not advertise during the Super Bowl.

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