Two Firms,A and B,are Faced with a Decision on Making

Essay

Two firms,A and B,are faced with a decision on making investments in safety.They each currently earn profit of $500.A safety investment would cost $100 paid by the firm that makes the investment and would lower both firms' labor costs by $75 per firm.If both firms share the investment ($50 each)their labor costs are lowered by $100 per firm.Draw the payoff matrix for this game and determine the Nash equilibrium.Does it make sense for the firms in the industry to ask the government to force them to make the investment? Explain.