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Question 5 30 pts Suppose Toyota and Honda must decide whether to make a new breed of side - impact airbags standard equipment on all
Question 5 30 pts Suppose Toyota and Honda must decide whether to make a new breed of side - impact airbags standard equipment on all models. Side - impact airbags raise the price of each automobile by $ 1,000. If both firms make side - impact airbags standard equipment, each company will earn profits of $2.5 billion. If neither company adopts the side - impact 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 profit of $3 billion and the other company will lose $ 1.5 billion. (a) Construct a payoff matrix for this game. (b) Find any Nash equilibrium. (c) Does any of the players have a dominant strategy? Please explain. (d) Does this game seem similar to any of the other games we have discussed in class? Which one? (e) If you were a decision maker at Honda, would you make side - impact airbags standard equipment? Explain. Question 5 30 pts Suppose Toyota and Honda must decide whether to make a new breed of side-impact airbags standard equipment on all models. Side-impact airbags raise the price of each automobile by $1,000. If both firms make side-impact airbags standard equipment, each company will earn profits of $2.5 billion. If neither company adopts the side-impact 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 profit of $3 billion and the other company will lose $1.5 billion. (a) Construct a payoff matrix for this game. (b) Find any Nash equilibrium. (c) Does any of the players have a dominant strategy? Please explain. (d) Does this game seem similar to any of the other games we have discussed in class? Which one? (e) If you were a decision maker at Honda, would you make side-impact airbags standard equipment? Explain
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