Coke and bottled water brands continue to run sales promotions and compete strongly on price.Clearly,the best solution would be for neither to promote which would jointly maximize their profits.However,both are worried that if they stop promoting while the other does not,they will suffer.As a result,the equilibrium is heavy promotion by both and lower total profits.With reference to the game theory,this is an example of:

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This is an example of the prisoner's dilemma game in game theory. Both players (Coke and bottled water brands) have an incentive to promote to gain market share and increase profits, but if both promote heavily, it leads to lower total profits due to the price war. The best solution would be for neither to promote, but the fear of losing market share to the other player leads to the equilibrium of heavy promotion by both. This is a classic example of the prisoner's dilemma, where both players would benefit if they cooperated, but the fear of the other player's actions leads them to a suboptimal outcome.

Coke and Bottled Water Brands Continue to Run Sales Promotions