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Question
In January 2011, Coca-Cola and Pepsi agreed to reduce their yearly advertising budgets by $1 million each, and neither firm reneged on the agreement throughout the year. In January 2012, Coca-Cola and Pepsi each announced that its company 2011 profits had increased by $1 million. Which of the following is a likely explanation for this increase?
a. A new entrant in the market caused Coca-Cola and Pepsi to lose substantial market share.
b. The government imposed a punitive tax on both firms for producing a beverage that is a danger to public health.
c. The firms had previously been in a prisoners dilemma situation where one firms advertisements were effectively canceling the other firms advertisements.
d. Coca-Cola drastically reduced the price of its soda relative to the price of Pepsis soda.
e. Pepsi drastically reduced the price of its soda relative to the price of Coca-Colas soda.
Answer
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