Reference no: EM131830711

Consider the shipping container (the large box that stacks on cargo ships and attaches to trucks). If all containers are the same size and design, then the container can pass seamlessly between ships, trains, trucks, and cranes along the way.

Today, the standard dimensions are 8 feet wide, 8.5 feet tall, and 40 feet long. (The recent book The Box tells the surprisingly gripping tale of how this size came to be the standard, and how it has cut the cost of shipping worldwide.) Let's see how this standard dimension illustrates the meaning of "Nash equilibrium."

a. Suppose an inventor created a new shipping container that was slightly cheaper to make, as well as stronger, but it had to be 41 feet long. Keeping the idea of standardization in mind, would this inventor be successful? Why or why not?

b. Suppose a container manufacturer reduced the strength of the end walls of his containers (saving him $100 per container made).

Although this makes no difference to containers on a boat, containers on a train are at risk as the container bumps against the flatcar when the train hits the brakes. Who would tend to oppose these weaker, cheaper containers: the company whose products are stored in the container, the train companies who transport the goods, or both?

c. Why does Federal Express, the overnight delivery company, require everyone to use FedEx packaging for most shipments?