Question: 4 . Individual Problems 15-5 Every year, management and labor renegotiate a new employment contract by sending their proposals to an arbitrator, who chooses the

4 . Individual Problems 15-5 Every year, management and labor renegotiate a new employment contract by sending their proposals to an arbitrator, who chooses the b (effectively giving one side or the other $3 million). Each side can choose to hire, or not hire, an expensive labor lawyer (at a cost of $200 effective at preparing the proposal in the best light. If neither hires a lawyer or if both hire lawyers, each side can expect to win about half only one side hires a lawyer, it can expect to win four fifths, or 0.8, of the time. Use the given information to fill in the expected payoff, in dollars, for each cell in the matrix. (Hint: To find the expected payoff, multiply probability of winning by the dollar amount of the payoff. Be sure to account for lawyer costs, which are incurred with certainty if a lawyer Management (M) No Lawyer Lawyer M: S M: S No Lawyer L: Labor (L) Lawyer L: $ M: The Nash equilibrium for this game is for Management to a lawyer, and for Labor to a lawyer

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