I’m working on a Economics exercise and need support.
Assume that Toyota is going to sign a 10-year contract with TRW to supply airbags for 75% of the airbags (to be installed) in new Toyota cars. However, before signing the contract, a manager working for Toyota finds out that a competitor of TRW has introduced an airbag that would reduce Toyota’s cost by 40%. How would this information affect the contract length with TRW? Why? How would your answer change if Toyota found out that the airbags TRW produced were causing injury to Toyota owners?