The given matrix demonstrate the payoffs for an advertising game between Hilton and the Oriental. The companies can choose to advertise or to not advertise. Numbers in the matrix represent profits, the first number in each cell is the payoff to Coke (numbers in millions.)
Hilton (rows)/Oriental (columns) Advertise Don't Advertise
Advertise (10, 10) (500, -50)
Don't Advertise (-50, 500) (100, 100)
a. Explain why this would be described as a Prisoner's Dilemma game. Show your calculations.
b. Explain the probable outcome of this game. Please support your reasoning with economics.