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.Suppose OPEC told Mexico that,in the event Mexico cheats on the agreement,OPEC will cheat as well,but if Mexico does not cheat,neither will OPEC.The outcome of the game is now
A) both will cheat.
B) Mexico will cheat and hope OPEC does not.
C) OPEC will cheat.
D) neither will cheat.
E) indeterminate.

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.Suppose OPEC told Mexico that,in the event Mexico cheats on the agreement,OPEC will cheat as well,but if Mexico does not cheat,neither will OPEC.The outcome of the game is now
A) both will cheat. 
B) Mexico will cheat and hope OPEC does not. 
C) OPEC will cheat. 
D) neither will cheat. 
E) indeterminate.

Quizplus · Accepted Answer

If both parties agree not to cheat and there is a mutual understanding that cheating by one will lead to cheating by the other, the most stable outcome is that neither will cheat to maintain mutual benefit.

Mexico and OPEC Both Produce Crude Oil