Suppose Suzuki and Hyundai must decide whether to add the feature of ‘speed alert system’ as standard equipment on all m
Posted: Wed Apr 27, 2022 11:50 am
Suppose Suzuki and Hyundai must decide whether to add the feature of ‘speed alert system’ as standard equipment on all models. Speed alert system increases the price of each car by Rs 1 lac. If both Suzuki and Hyundai decide to add the feature of speed alert system, each company will earn profits of Rs 25 crores. If neither company adopts the speed alert system, each company will earn Rs 10 crores (due to lost sales to other carmakers). If one company adopts the feature as standard equipment and the other does not, the adopting company will earn a profit of Rs 30 crores and the other company will lose Rs 15 crores. If you were a decision maker at Hyundai, would you make ‘speed alert system’ standard equipment? Explain.