Table 12.4 -Refer to Table 12.4.Suppose the Payoff Matrix in the Above

question 130

Essay

Table 12.4

-Refer to Table 12.4.Suppose the payoff matrix in the above figure represents the payoffs to Saudi Arabia and Yemen for the production of oil.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic, relatively low production rates drive up prices and profits.Saudi Arabia, the world's largest and lowest cost producer, is able to influence market price; it has an incentive to keep output low.Yemen, on the other hand, is a relatively high cost producer with much smaller reserves.Assume Saudi Arabia now decides to try to further influence the oil market by offering to pay Yemen $25 million to produce a low output.
a.Create a new payoff matrix that reflects Saudi Arabia's willingness to pay Yemen $25 million to produce a low output.
b.What is the dominant strategy for each country in this new game?
c.What is the new Nash equilibrium?

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Definitions:

Horizontal Gene Transfer

The movement of genetic material between unicellular and/or multicellular organisms other than by the "vertical" transmission of DNA from parent to offspring.

Binary Fission

A form of asexual reproduction seen in prokaryotic organisms and some single-cell eukaryotes where a cell divides into two genetically identical cells.

Commensalism

A type of symbiosis in which one organism benefits and the other one is neither harmed nor helped. Compare with mutualism and parasitism.

Lactic-Acid Bacteria

A group of gram-positive bacteria that produce lactic acid as their major metabolic end product during the fermentation of carbohydrates.