Question

Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. Pursuing its own best interests, Firm Awill concede that cigarette smoke causes cancer.
a. only if Firm B concedesthat cigarette smoke causes lung cancer.
b. only if Firm B does notconcede that cigarette smoke causes lung cancer.
c. regardless of whetherFirm B concedes that cigarette smoke causes lung cancer.
d. none of the above. Inpursuing its own best interests, Firm A will in no case concedethat cigarette

Answer 1

Answer:

d. none of the above. In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes cancer

Explanation:

The given scenario is a classic case of prisoner's dilemma.

Individuals in a given situation tend to tend to not cooperates or confess even if doing so is in their best interest.

Rationally Firm A will have the incentive of a lower liability in the suit brought against them. But they will in no situation admit that cigarette smoke causes cancer. Even if Firm B admits to it.

The best interest for Firm A will be not to admit and maintain their sales as this will affect their business adversely