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?
