# Economics: Game Theory Assignment

What is the Nash equilibrium in the following game? 2. Does the following game have a Nash equilibrium? Does it have more than one Nash equilibrium? If so, what are they? 3. Coca-Cola and Pepsi are competing in the Brazilian soft-drink market. Each firm is deciding whether to follow an aggressive advertising strategy, in which the firm significantly increases its spending on media and billboard advertising over last year’s level, or a restrained strategy, in which the firm keeps its advertising spending equal to last year’s level.

The profits associated with each strategy are as follows: What is the Nash equilibrium in this game? Is this game an example of the prisoners’ dilemma? Why? 4. In a small country there are only two major airline firms. Each firm is deciding whether to offer a frequent flyer program. The annual profits (in millions of dollars) associated with each strategy are summarized in the following table (where the first number is the payoff to Airline A and the second to Airline B): ) Does either player have a dominant strategy? If so, what is it? B) Is there a Nash equilibrium in this game? If so, what is it? ) Is this

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