Prisoner's Dilemma in Pricing
Both firms price HIGH: If both firms price their products high, the total market profit is $20 million, which they split equally.
Pepsi LOW and Coke HIGH: If one firm prices high while the other prices low, the total market profit is $19 million, which is split unevenly. Pepsi's profits are $12 million and Coke's are $7 million.
Pepsi HIGH and Coke LOW: If one firm prices high while the other prices low, the total market profit is $19 million, which is split unevenly. Pepsi's profits are $7 million and Coke's are $12 million.
Both firms price LOW: If both firms price their products low, the total market profit is $18 million, which they split equally.
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MARKET ASSUMPTIONS
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