Problem
Consider the Coke and Pepsi example discussed.
a) Explain why each firm's reaction function slopes upward. That is, why does Coke's profit-maximizing price go up the higher is Pepsi's price? Why does Pepsi's profit-maximizing price go up the higher Coke's price is?
b) Explain why Pepsi's profit-maximizing price seems to be relatively insensitive to Coke's price. That is, why is Pepsi's reaction function so flat?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.