Find the solution to the following advertising decision game between Coke and Pepsi by using the method of successive elimination of dominated strategies.

Payoffs in millions of dollars of annual profit

a. Does Coke have a dominated strategy in the original payoff table? If so, what is it and why is it dominated? If not, why not?

b. Does Pepsi have a dominated strategy in the original payoff table? If so, what is it and why is it dominated? If not, why not?

c. After the first round of eliminating any dominated strategies that can be found in the original payoff table, describe the strategic situation facing Coke and Pepsi in the reduced payoff table.

d. What is the likely outcome of this advertising decision problem?

e. Pepsi?s highest payoff occurs when Coke and Pepsi both choose high ad budgets. Explain why Pepsi will not likely choose a high ad budget.

Transcribed Image Text:

Coke's budget $400, $400 Medium $500, $300 High $375, $420 Pepsi's budget Low Medium Low A $320, $720 D E $450, $525 G H $300, $378 High B C $560, $600 F $540, $500 I $525, $750 Coke's budget $400, $400 Medium $500, $300 High $375, $420 Pepsi's budget Low Medium Low A $320, $720 D E $450, $525 G H $300, $378 High B C $560, $600 F $540, $500 I $525, $750

Answer rating: 100% (QA)

a No Coke do not has a dominated strategy in the original payoff table b No ... View the full answer