cost.If Lew's does offer a one year warranty then Harry's will only be able to sell its cars for $8500 and the company will not make any profit. Lew's will match Harry's warranty because if it does then its profit increases from $2.000to$2,500 per car. Harry's should not offer the one-year warranty unless it thinks that Lew's will act irrationally and not offer the one-year warranty.Given Lew's will match the wamanty. Harry's is better off not offering the warranty. (b)What if Harry offers a two-year warranty?Will this generate a credible signal of quality?What about a three-year warranty? If Harry's offers a two-year warranty each car will cost $9,000.It will earn $1,000 per car as consumers will recognize the higher quality of its cars.Lew's will not offer a two year warranty because if they do they will only eam profit of $1,500 per car, which is less than the $2.000 they would eamn without offering the warranty.The two year warranty is a credible signal. With a three-year warranty Harry's would be making $500 per car,the same that it would have made had it not signaled the higher quality of its cars with a warranty Therefore.Hary's would not offer a three-year warranty. (c)If you were advising Harry,how long a warranty would you urge him to offer? Explain why. Harry's will need to offer a warranty of sufficient length such that Lew's will not find it profitable to match the warranty.Let i denote the number of years of the warrarty. then Lew's will offer a warranty according to the following inequality: 7000-5000≤8500-5000-1000t,ort≤1.5. Therefore,I would advise Harry's to offera 1.5 year warranty on his cars as Lew's will not find it profitable to match the warranty.cost. If Lew’s does offer a one year warranty then Harry’s will only be able to sell its cars for $8,500 and the company will not make any profit. Lew’s will match Harry’s warranty because if it does then its profit increases from $2,000 to $2,500 per car. Harry’s should not offer the one-year warranty unless it thinks that Lew’s will act irrationally and not offer the one-year warranty. Given Lew’s will match the warranty, Harry’s is better off not offering the warranty. (b) What if Harry offers a two-year warranty? Will this generate a credible signal of quality? What about a three-year warranty? If Harry’s offers a two-year warranty each car will cost $9,000. It will earn $1,000 per car as consumers will recognize the higher quality of its cars. Lew’s will not offer a two year warranty because if they do they will only earn profit of $1,500 per car, which is less than the $2,000 they would earn without offering the warranty. The two year warranty is a credible signal. With a three-year warranty Harry’s would be making $500 per car, the same that it would have made had it not signaled the higher quality of its cars with a warranty. Therefore, Harry’s would not offer a three-year warranty. (c) If you were advising Harry, how long a warranty would you urge him to offer? Explain why. Harry’s will need to offer a warranty of sufficient length such that Lew’s will not find it profitable to match the warranty. Let t denote the number of years of the warranty, then Lew’s will offer a warranty according to the following inequality: 7000-5000  8500-5000-1000t, or t  1.5. Therefore, I would advise Harry’s to offer a 1.5 year warranty on his cars as Lew’s will not find it profitable to match the warranty