Question

To advertise or not to advertise

Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises:

		Pop Hop
		Advertise	Doesn

Answer 1

If Fizzo decides to advertise, it will earn a profit of 9 million if Pop Hop advertises and a profit of million 15 if Pop Hop does not advertise.

If Fizzo decides not to advertise, it will earn a profit of 3 million if Pop Hop advertises and a profit of 11 million if Pop Hop does not advertise.

If Pop Hop advertises, Fizzo makes a higher profit if it chooses to advertise .

If Pop Hop doesn't advertise, Fizzo makes a higher profit if it chooses to advertise

Both firms will choose to advertise.

Both firms will choose not to advertise.