Use the Following to Answer Questions: Table: Russia, Saudi Payoff

question 20

Multiple Choice

Use the following to answer questions: Table: Russia, Saudi Payoff Table
Suppose that the oil market is dominated by two large firms, Saudi Arabia and Russia. Both Saudi Arabia and Russia have two choices or strategies: cooperate by cutting back production or cheat by increasing production. The payoff table below shows the potential revenues associated with each firm's strategies. For instance, if Saudi Arabia cheats and Russia cooperates, the payoff to Saudi Arabia is $1,000 and the payoff to Russia is $400. $$\begin{array} { | l | l | c | c | } \hline & & \text { Russia's Strategies } & { \text { Cheat } } \\\hline & & \text { Cooperate } & ( \$ 400 , \$ 1,000 ) \\\hline \text { Saudi Arabia's } & \text { Cooperate } & ( \$ 800 , \$ 800 ) & ( \$ 600 , \$ 600 ) \\\hline \text { Strategies } & \text { Cheat } & ( \$ 1,000 , \$ 400 ) & ( \$ 5 ) \\\hline\end{array}$$
-(Table: Russia, Saudi Payoff Table) Refer to the table. What is Saudi Arabia's best strategy and associated payoff if Russia cheats?

• A) cooperate; $400
• B) cheat; $600
• C) cooperate; $800
• D) cheat; $800

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