oca$-$Cola Discussion Question $-$ CLO $1,$ CLO $2,$ CLO $3,$ CLO $4,$ CLO $6$

Analyze the following scenario by incorporating what you learned in Chapters $9$ & $10$ of your textbook and answer the following question:

Coca$-$Cola and PepsiCo are the leading competitors in the market for cola products. In $1960$ Coca$-$Cola introduced Sprite, which today is among the worldwide leaders in the lemon$-$lime soft drink market and ranks in the top $10$ among all soft drinks worldwide. Prior to $1999,$ PepsiCo did not have a product that competed directly against Sprite and had to decide whether to introduce such a soft drink. By not introducing a lemon$-$lime soft drink, PepsiCo would continue to earn a $$200$ million profit, less than Coca$-$Cola$$s profit of $$300$ million.

Suppose that by introducing a new lemon$-$lime soft drink, one of two possible strategies could be pursued:

PepsiCo could trigger a price war with Coca$-$Cola in both the lemon$-$lime and cola markets.

Coca$-$Cola could acquiesce and each firm would maintain its current $50/50$ split of the cola market,while splitting the lemon$-$lime market $30/70($PepsiCo$/$Coca$-$Cola$).$

If PepsiCo introduced a lemon$-$lime soft drink and a price war resulted, both companies would earn profits of $$100$ million. Alternatively, Coca$-$Cola and PepsiCo would earn $$275$ million and $$227$ million, respectively.

If PepsiCo introduced a lemon$-$lime soft drink and Coca$-$Cola acquiesced, they could split the markets.

Imagine you are a manager at PepsiCo and explain your answer to the following question:

Would you try to convince your colleagues that introducing the new soft drink is the most profitable strategy by explaining the reasoning and theoretical analysis? Why or why not?