(Table: Coke and Pepsi Advertising Game) Look at the table Coke and Pepsi Advertising Game.The soft-drink industry is dominated by Coke 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 whether to advertise on the Super Bowl independently, what is the Nash equilibrium of this game?

Question

Quizplus · Accepted Answer

The Nash equilibrium is for both firms to advertise during the Super Bowl. This is because each firm's profit is higher if it advertises, regardless of what the other firm does.

(Table: Coke and Pepsi Advertising Game) Look at the Table