Scenario 16-1
Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits. In the world market for oil, the demand curve is downward sloping.
-Refer to Scenario 16-1.As long as production levels are less than the Nash equilibrium level,both Irun and Urun have the individual incentive to

Question

Quizplus · Accepted Answer

As long as production levels are less than the Nash equilibrium level, both Irun and Urun have the individual incentive to increase production. This is because they can capture a larger share of the market by increasing their output, which will result in higher profits for them. Holding production levels constant or decreasing production will only result in smaller market shares and lower profits. Increasing the price is not a viable option because it will lead to a decrease in demand, which will ultimately result in lower profits.

Scenario 16-1 Assume That the Countries of Irun and Urun Are the Are