Table 14-3

Suppose OPEC has only two producers, Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Nigeria.The payoff matrix in Table 14-3 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 14-3.What is the Nash equilibrium in this game?

Question

Table 14-3
  
Suppose OPEC has only two producers, Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Nigeria.The payoff matrix in Table 14-3 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 14-3.What is the Nash equilibrium in this game?

Quizplus · Accepted Answer

In this game, Saudi Arabia has a dominant strategy of producing a low output since it earns a higher profit of $80 million regardless of Nigeria's choice. Nigeria, on the other hand, has a dominant strategy of producing a high output since it earns a higher profit of $30 million regardless of Saudi Arabia's choice. Therefore, the Nash equilibrium is when Saudi Arabia produces a low output and Nigeria produces a high output, resulting in profits of $80 million and $30 million, respectively.

Table 14-3 Suppose OPEC Has Only Two Producers, Saudi Arabia and Nigeria.Saudi