Oscar

-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then _______.
A) Felix will comply and Oscar will make $12 million economic profit
B) Felix and Oscar will each make $10 million economic profit
C) Felix and Oscar will each make $1 million economic profit
D) Felix will cheat and Oscar will make - $2 million economic profit

Question

Oscar
 
-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then _______.
A) Felix will comply and Oscar will make $12 million economic profit 
B) Felix and Oscar will each make $10 million economic profit 
C) Felix and Oscar will each make $1 million economic profit 
D) Felix will cheat and Oscar will make - $2 million economic profit

Quizplus · Accepted Answer

In a one-time game, both firms have an incentive to cheat to maximize their own profit, leading to the Nash equilibrium where both cheat and earn $1 million each.

Oscar -Oscar and Felix Are the Only Firms That Clean Offices