Table 112

A Hypothetical Prisoner's Dilemma Faced by Coca-Cola and Pepsi-Cola

Pepsi-Cola

Discount Price

Regular Price

Discount Price Regular Price

Nash equilibrium

Set of decision strategies where no player can improve through a unilateral change in strategy

Nash bargaining

Where two competitors haggle over some item of value itself of at least $2,000 in weekly profits. For both Coca-Cola and Pepsi-Cola, the only secure strategy is to offer discount prices, thereby assuring consumers of bargain prices and themselves of modest profits of $4,000 and $2,000 per week, respectively.

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