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. If you were a decision maker at

Honda, would you make side-impact airbags standard equipment? Explain.