Reference no: EM132617636

Coke and Pepsi know that they are spending millions of dollars on advertising just to counter each other's ads. The marketing managers of the two firms spend a weekend on the golf course plotting a collaboration that will cut each firm's costs by $100 million a year. Back at the office on Monday morning, they begin to sell their scheme to their chief financial officers, who have studied some economics. The CFOs tell the marketing managers that their plan won't work. 

1. Why are the CFO's so sure? Sketch a payoff matrix that describes the advertising game played by Coke and Pepsi that supports the CFOs.  Find and describe the Nash equilibrium for the game.
2. Sketch a payoff matrix that describes an advertising game played by Coke and Pepsi that does not support the CFOs and that makes the sales managers' plan possible. Find and describe the Nash equilibrium for the game.