Table 11-8 Suppose OPEC Has Only Two Producers, Saudi Arabia

question 251

Multiple Choice

Table 11-8
Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 11-8 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 11-8.Which of the following statements is true?

• A) The Nash equilibrium is a noncooperative, dominant strategy equilibrium.
• B) The Nash equilibrium is a cooperative equilibrium.
• C) The Nash equilibrium is a collusive equilibrium.
• D) There is no Nash equilibrium in this game because each party pursues its dominant strategy.

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