Use the following to answer questions:
-(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 its 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, the Nash equilibrium is for Coke _____ and Pepsi _____ during the Super Bowl.
A) to advertise; to advertise
B) not to advertise; not to advertise
C) not to advertise; to advertise
D) to advertise; not to advertise

Question

Use the following to answer questions: 
-(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 its 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, the Nash equilibrium is for Coke _____ and Pepsi _____ during the Super Bowl.
A) to advertise; to advertise 
B) not to advertise; not to advertise 
C) not to advertise; to advertise 
D) to advertise; not to advertise

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the strategy of the other player. If both Coke and Pepsi choose to advertise, neither can increase their payoff by unilaterally changing their decision, making it the Nash equilibrium.

Use the Following to Answer Questions