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Coke and Pepsi are currently in a price war. It began when Coke lowered the price of its 12 pack Coca-Cola Classic from $6.99 to
Coke and Pepsi are currently in a price war. It began when Coke lowered the price of its 12 pack Coca-Cola Classic from $6.99 to $6.69 and held firm at that price. Pepsi followed suit by lowering the price of its 12 pack Pepsi to $6.69. Pepsi now has a tough decision to make and is unsure of what Coke's next move will be. It has estimated the probabilities of what Coke will do based on past experience. Below is a payoff matrix for Pepsi and Coke with profits (in millions). Find the Nash equilibrium (Pepsi strategy first, Coke strategy second). (Be careful with credible threats) Coke Lower to $6.59 Lower to $6.49 Lower to $6.39 Pepsi Keep Price at $6.69 5, 3 4, 5 4, 3 Lower Price to $6.49 6, 5 5, 5 4, 3
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