Nike and Adidas Are Considering Whether to Advertise Heavily During

question 34

Essay

Nike and Adidas are considering whether to advertise heavily during the Soccer World Cup. Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision. Does the repeated game scenario differ from a single period game? Is it possible that a repeated game (without collusive agreements) could lead to an outcome that is better than a single period game? Explain the circumstances in which this may be true.

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Definitions:

Output

The total amount of products or services produced by a company, industry, or economy.

Marginal External Costs

The additional cost imposed on third parties not involved in a transaction or decision, for each additional unit produced or consumed.

Peach Canners

Peach canners are production facilities or workers involved in preserving peaches by canning them, which involves processing, sealing in an airtight container, and sterilizing to extend shelf life.

Market Efficiency

The extent to which market prices fully reflect all available information, making it impossible to consistently achieve higher returns.