Table 11.2 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 11.2 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 11.2.Which of the following statements is true?

Question

Table 11.2  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 11.2 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 11.2.Which of the following statements is true?

Quizplus · Accepted Answer

In this game, the dominant strategy for Saudi Arabia is to produce high output, regardless of Nigeria's choice. Similarly, Nigeria's dominant strategy is to produce low output, regardless of Saudi Arabia's choice. Therefore, the Nash equilibrium is a non-cooperative, dominant strategy equilibrium, where both countries produce at their dominant strategy level.

Table 112 Suppose OPEC Has Only Two Producers, Saudi Arabia