Question 1:

Nestl's has over one hundred production facilities that all purchase hair nets and other hygienic supplies through independent suppliers. Nestl created a centralized purchasing system that is cumbersome to use has the potential to bargain for lower prices. Suppose that a division can purchase hairnets for $8 independently. If they all purchase through the central system, hairnets cost $6. But if one division uses the system and the other purchases independently, the cost to the first is $9 while the cost to the second is $7. What does the simultaneous move game look like and what is the equilibrium?