Coca Cola vs Pepsi

Duopoly competitors Coca Cola and Pepsi are deciding whether to:

1. Remain with their current original formula
2. Redesign their product using a new formula

Consider the following hypothetical scenario, and use it to populate the matrix below:

• If Coca Cola sticks to the original formula but Pepsi goes ahead with a new formula Coca Cola will make a profit of $8 million, whereas Pepsi will make a profit of $4 million.
• If Coca Cola and Pepsi both use a new formula then they will make a profit of $6 and $7 million respectively.
• If both Coca Cola and Pepsi stick to the original formula then they will make a profit of $4 and $10 million respectively.
• If Coca Cola goes ahead with a new formula but Pepsi sticks with their original formula, then Coca Cola will make a profit of $12 million while Pepsi will make $9 million as its profits.

Enter numbers in terms of $millions i.e. if your answer is $20 million, simply enter 20 without the $ or the word million. Once you have completed the matrix, click ‘Evaluate’ to check your answer and continue to the next step.