Suppose That Coke^® and Pepsi^® Are in a Fierce Competition

question 48

Essay

Suppose that Coke^® and Pepsi^® are in a fierce competition for the cola market. Each week each person in the market buys one case of Coke^® or Pepsi^®. If the person's last purchase was Coke®, there is a 0.80 probability that this person's next purchase will be Coke^®; otherwise, it will be Pepsi^®. (We are considering only two brands in the market in this scenario.) Similarly, if the person's last purchase was Pepsi^®, there is a 0.90 probability that this person's next purchase will be Pepsi^®; otherwise, it will be Coke^®. Currently half of all people purchase Coke^®, and the other half purchase Pepsi^®. Simulate one year of sales in the cola market and estimate each company's average weekly market share. Do this by assuming that the total market size is fixed at 100 customers. (Hint: Use the RISKBINOMIAL function.)

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Definitions:

Marginal Benefit (MB)

The extra advantage gained by using an additional unit of a product or service.

Marginal Cost (MC)

The financial cost of creating an additional unit of a product or service.

Prison Rates

The number of individuals incarcerated within a prison system per 100,000 population in a specific geographic area.

Crime Rates

The number of reported criminal incidents as a proportion of the population in a given area during a specified period.