Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million.
-Refer to the information given above.Mexico finds that it has
A) no dominant strategy.
B) a dominant strategy.
C) no dominated strategy.
D) a dominant strategy of cheating.
E) a dominated strategy of not cheating.

Question

Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million. 
-Refer to the information given above.Mexico finds that it has
A) no dominant strategy. 
B) a dominant strategy. 
C) no dominated strategy. 
D) a dominant strategy of cheating. 
E) a dominated strategy of not cheating.

Quizplus · Accepted Answer

Mexico has a dominant strategy of cheating, as it earns more profit whether OPEC cheats or not. Cheating leads to Mexico earning $110 million if OPEC does not cheat, and $80 million if OPEC cheats, compared to earning $100 million if both stick to the agreement. Therefore, regardless of OPEC's actions, it is in Mexico's best interest to cheat.

Mexico and OPEC Both Produce Crude Oil