Q1 I asked for a solution for the Chase Manhattan Bank case study and was wondering how my tutor was doing on it. The last comment I noticed was that he/she was working on it. I have no email as yet and the last time I checked was at 4:47 PM today.

Q2 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 $1 million). Each side can choose to hire, or not hire, an expensive labor lawyer (at a cost of $200,000) who is effective at preparing the proposal in the best light. If neither appoints 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.

b. What is the Nash Equilibrium of the game?

c. Would the sides want to ban lawyers?

Note-

Part of the payoff matrix looks like the subsequent

Management

No Lawyer Lawyer

Labor No Lawyer ($ , $500,000) ($ , $ )

Lawyer ($ , $ ) ($300,000, $ )