1. Profit and competition
Prediction case on Prisoner’s
Dilemma for an advertising
spending decision
Prepared by J. Scott Armstrong (details on him at jscottarmstrong.com).
Please inform Scott about errors and also make suggestions (armstrong@wharton.upenn.edu)
Scott has taken these slides from adprin.com, a site that he founded. That site contains interactive versions of these
slides, along with linked references, videos, and webcasts, all in PPT and PPTX format that you can download.

2. Prediction of research findings
57 subjects made “advertising spending
decisions as marketing managers of medium-
sized manufacturers in mature markets.”
Cooperative decisions would produce higher
profits than competitive decisions. (Prisoners Dilemma
design)
What % chose the less profitable objective so they
could beat their competitor?
See the next slide for the answer from (Corfman & Lehmann 1994)
Adapted from AdPrin.com 2

3. 78%
For more information, see AdPrin.com

4. Based on this exercise, write a small application step for yourself,
and set a deadline, preferably within one week. If you are
working with someone else, share your application plan and the
results of your application.
• For example, advertising by your firm might help you as well
as others. Advertising by Starbucks has helped to increase the
market for coffee shops.
• As another example, cooperating in efforts to develop
improved advertising principles would be helpful to your
organization as well as to others.
Adapted from AdPrin.com