Table 14-4
The payoff matrix shown above assumes that Pepsi and Coca-Cola must decide whether to advertise their products.The matrix shows how much profit each firm will earn if it does or does not advertise.The amount of profit for one firm depends on whether the other firm advertises.
-Refer to Table 14-4.Which of the following statements is true?

Question

Table 14-4
  The payoff matrix shown above assumes that Pepsi and Coca-Cola must decide whether to advertise their products.The matrix shows how much profit each firm will earn if it does or does not advertise.The amount of profit for one firm depends on whether the other firm advertises.
-Refer to Table 14-4.Which of the following statements is true?

Quizplus · Accepted Answer

If Pepsi advertises, Coca-Cola's best strategy to earn more profit is also to advertise. This is because if Coca-Cola does not advertise, it will earn only $800 million in profits, which is less than the $1,000 million it could earn by advertising. However, if Coca-Cola advertises, Pepsi's profits will decrease to $300 million, which is less than the $500 million it could earn by not advertising. Therefore, Coca-Cola's best strategy when Pepsi advertises is to also advertise.

Table 14-4 the Payoff Matrix Shown Above Assumes That Pepsi