How is an advertising game a prisoner' s dilemma? Game theory collusion problem
Suppose that tow firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets. But in order for the plan to work, each firm must agree to refrain from advertising. Each firm believes that advertising works by increasing the demand for the firm's product, but each firm also believes that if neither firm advertises, the cost savings will outweight the lost sales. The table below lists ech firm's individual profits.