Hi,

I need you help,

Thank you :)

Suppose that each of two competitors, Coke and Pepsi, must select their respec- tive advertising budgets. For simplicity assume two sizes of advertising budg- ets: moderate and large. The prots (payoffs) for each rm are as follows: - If both rms, choose a large budget they will each earn a prot of $60M - If one rm chooses a large budget and the other chooses a moderate budget, the rm choosing the large budget earns a prot of $90M while the rm choosing the moderate budget earns $50M - If both rms, choose a moderate budget they each earn $80M a) Construct the payoff matrix given the information above. b) If Coke and Pepsi collude on their choice of advertising budgets, which would they select? EXPLAIN c) Is the cooperative outcome stable? EXPLAIN d) What is the non-cooperative outcome for this game? Is this stable? EX- PLAIN e) Do either of the firms have a dominant strategy? Is there a Nash equi- librium for the game? EXPLAIN