Table 14-10 -Refer to Table 14-10.Suppose the Payoff Matrix in the Above

question 14

Essay

Table 14-10

-Refer to Table 14-10.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:

Organizational Justice

Type of justice that is composed of organizational procedures, outcomes, and interpersonal interactions.

Distribution

The process by which goods or services are made available and dispersed to a wide audience or market.

Interaction

The process by which two or more entities communicate or influence each other.

Dignity

The state or quality of being worthy of honor or respect, often considered an inherent attribute of all human beings.