Nestlé’s has over one hundred production facilities that all purchase hair nets and other hygienic
supplies through independent suppliers. Nestlé created a centralized purchasing system that is
cumbersome to use has the potential to bargain for lower prices. Suppose that a division can
purchase hairnets for $8 independently. If they all purchase through the central system, hairnets
cost $6. But if one division uses the system and the other purchases independently, the cost to the
first is $9 while the cost to the second is $7. What does the simultaneous move game look like
and what is the equilibrium?
