Suppose that Fizzo and Pop Hop are the only two firms that sell orange pop. The

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Suppose that Fizzo and Pop Hop are the only two firms that sell orange pop. The payoff matrix that follows shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises. For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $7 million and Pop Hop will make a profit of $1 million Both Fizzo and Pop Hop are profit-maximizing firms Pop Hop 3, 3 1, 7 Advertise Don't Advertise Advertise 7, 1 Fizzo Don't Advertise 5, 5 If Fizzo decides to advertise, it will earn a profit of if Pop Hop advertises and a profit of f Pop Hop does not advertise. If Fizzo decides not to advertise, it will earn a profit of if Pop Hop advertises and a profit of f Pop Hop does not advertise. If Pop Hop advertises, Fizzo makes a higher profit if it chooses If Pop Hop doesn't advertise, Fizzo makes a higher profit if it chooses

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Answers:

1) If Fizzo decides to advertise, it will earn a profit of 3 million if Pop Hop advertises and a profit of 7 million if Pop Hop does not advertise.

2) If Fizzo decides not to advertise, it will earn a profit of 1 million if Pop Hop advertises and a profit of 5 million if Pop Hop does not advertise.

3) If Pop Hop advertises, Fizzo makes a higher profit if it chooses 3 million.

4) If Pop Hop doesn't advertise, Fizzo makes a higher profit if it chooses 7 million.

5) Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing?

Both firms will choose not to advertise.

If the firms act independently, they get 5 million of profits for each. So, this strategy is better to compare with other strategy.

6) Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?

Both firms will choose not to advertise.

Even the both firms collude, they chooses same 5 million strategy, because it is the optimum to both of the firms in the game.

7) If might be easier for Fizzo and Pop Hop to achieve the cooperative outcome of the game if:

It was difficult to monitor whether the other player was advertising or not?

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Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The

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Suppose that Fizzo and Pop Hop are the only two firms that sell orange pop. The

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