This study source was downloaded by 100000832882090 from CourseHero.com on 04-11-2024 01:13:11 GMT -05:00 https://www.coursehero.com/file/227648221/ME-week5docx/ 1. Every year, management and labor r ...

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This study source was downloaded by 100000832882090 from CourseHero.com on 04-11-2024 01:13:11 GMT -05:00
https://www.coursehero.com/file/227648221/ME-week5docx/ 1. Every year, management and labor renegotiate a new employment contract by sending
their proposals to an arbitrator who chooses the best proposal (effectively giving one side
or the other $2 million). Each side can choose to hire, or not hire, an expensive labor lawyer
(at a cost of $400,000) who is effective at preparing the proposal in the best light. If neither
hires lawyers or if both hire lawyers, each side can expect to win about half the time. If only
one side hires a lawyer, it can expect to win three-quarters of the time.
a. Diagram this simultaneous-move game.
Management
No Lawyer Lawyer
Labor No lawyer 1,000,000; 1,000,000 500,000; 1,100,000
Lawyer 1,100,000; 500,000 600,000; 600,000
Both will receive $1 million each, or half of the $2 million, if they do not hire attorneys.

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