The tendency for both Coca-Cola and Pepsi to compete through large advertising budgets which have little impact on their relative market shares cannot be a true example of a "prisoners' dilemma" because both firms remain highly profitable.

Question

Quizplus · Accepted Answer

The concept of a "prisoner's dilemma" in this context refers to a situation where two parties, despite having the option to cooperate for mutual benefit, end up in a suboptimal outcome due to a lack of trust or communication. The profitability of Coca-Cola and Pepsi does not negate the existence of a prisoner's dilemma; it's about the inefficiency and potential for higher profits or better outcomes that could be achieved through different strategies, not the current level of profit.

The Tendency for Both Coca-Cola and Pepsi to Compete Through