Table 17-3
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health-care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces.

-Refer to Table 17-3.Pursuing its own best interests,when will Firm B concede that cigarette smoke causes lung cancer

Question

Table 17-3 
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health-care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces.

-Refer to Table 17-3.Pursuing its own best interests,when will Firm B concede that cigarette smoke causes lung cancer

Quizplus · Accepted Answer

The table shows that Firm B's dominant strategy is to concede regardless of Firm A's decision. This is because the best outcome for Firm B is to concede and pay the lower liability fine of $300 million, regardless of whether Firm A concedes or denies that cigarette smoke causes lung cancer. Therefore, Firm B will concede even if Firm A denies that cigarette smoke causes lung cancer.

Table 17-3 Two Cigarette Manufacturers (Firm a and Firm B) Are Faced