Assume that Incom Fighter Systems is suing the New Republic for breach of contract. They have filed suit for 100 million galactic credits due to a cancelled X-Wing order. However, before the case goes to trial, the two parties can try and negotiate a settlement. The New Republic can make an offer, and then Incom can either accept the offer or press forward with the suit. (Assume there is just a single offer, and no counteroffers). Each side believes that Incom has a 70% chance of winning the lawsuit if it ends up in court. In addition, Incom would have to pay 15 million credits in lawyers’ fees, while the New Republic would pay 5 million if the case goes to trial. Draw the game, then solve it to determine its SPNE. What happens? How much does each side end up with? 

Answer rating: 100% (QA)

ATTACHED IMAGE Pric... View the full answer