Can you change the payoffs in the table to the right so that the firms choose to invest in safety?Each firm must consider how safe to make its plant. Extra safety is costly. Safety investments-sprinkler systems, color-coded switches.fire extinguishers-by one firm provide an externality to other firms: That firm's lower incidence of accidents reduces the wage that allfirms in the industry must pay. Because each firm bears the full cost of its safety investments but derives only some of the benefits, thefirms underinvest in safety.It will be a Nash equilibrium for both firms invest safety ifO A. the payoffs for both firms investing increase to $750 and the payoffs for both firms not investing decrease to $50.O B. the payoffs for both firms investing go to $0.OC. the payoffs for both firms investing increase to $750.O D. the payoffs for both firms investing increase to $350 and the payoffs for both firms not investing decrease to $50.O E. the payoffs for both firms not investing go to $0.No InvestmentFirm 1InvestmentNo Investment Investment$200$200$700Firm 2$100$100$700$300$300

There are two players in the game - Firm 1 and Firm 2 Strategy Set of firm 1 = Strategy Set of firm…

Can you change the payoffs in the table to the right so that the firms choose to invest in safety? Each firm must consider how safe to make its plant. Extra safety is costly. Safety investments-sprinkler systems, color-coded switches. ire extinguishers-by one firm provide an externality to other firms: That firm's lower incidence of accidents reduces the wage that all irms in the industry must pay. Because each firm bears the full cost of its safety investments but derives only some of the benefits, the Firms underinvest in safety. t will be a Nash equilibrium for both firms to invest in safety if OA. the payoffs for both firms investing increase to $750 and the payoffs for both firms not investing decrease to $50. OB. the payoffs for both firms investing go to 50. OC. the payoffs for both firms investing increase to $750. OD. the payoffs for both firms investing increase to $350 and the payoffs for both firms not investing decrease to $50. OE. the payoffs for both firms not investing go to SD.

Can you change the payoffs in the table to the right so that the firms choose to invest in safety? Each firm must consider how safe to make its plant. Extra safety is costly. Safety investments-sprinkler systems, color-coded switches. ire extinguishers-by one firm provide an externality to other firms: That firm's lower incidence of accidents reduces the wage that all irms in the industry must pay. Because each firm bears the full cost of its safety investments but derives only some of the benefits, the Firms underinvest in safety. t will be a Nash equilibrium for both firms to invest in safety if OA. the payoffs for both firms investing increase to $750 and the payoffs for both firms not investing decrease to $50. OB. the payoffs for both firms investing go to 50. OC. the payoffs for both firms investing increase to $750. OD. the payoffs for both firms investing increase to $350 and the payoffs for both firms not investing decrease to $50. OE. the payoffs for both firms not investing go to SD.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 16.1IP

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