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l. (10 points) Suppose Toyota and Honda must decide whether to make a new kind of side impact airbags standard equipment on all models. Side
l. (10 points) Suppose Toyota and Honda must decide whether to make a new kind of side impact airbags standard equipment on all models. Side impactairbags raise the price of each automobile by $1000. If both rms make sideimpact airbags standard equipment, each company will earn prots of $2.5 billion. If neither company adopts the sideimpact airbag technology, each company will earn $1 billion (due to lost sales to other automakers). If one company adopts the technology as standard equipment and the other does not, the adopting company will earn a prot of $3 billion and the other company will lose $1.5 billion. If you were a decision maker at Honda, would you make sideimpact airbags standard equipment? Explain (Hint: prepare a payoff matrix rst)
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