Refer to Figure 9

question 8

Essay

Refer to Figure 9.4.The payoffs to each firm (in billions of dollars)and an extensive form game between BP and Shell are shown in the figure.BP has 20 percent of the U.S.gasoline market share and Shell has 16 percent market share.BP and Shell are attempting to determine whether to send geologists to explore Oil Track 20. (a)Is there a dominant strategy for Shell? What is the dominant strategy,if any,for Shell?
(b)What is the Nash equilibrium or equilibria in this game?
(c)What is a first-mover advantage? Does BP have a first-mover advantage in this game?
(d)Use the above information to advise BP on whether they should pursue a merger with Shell.

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Definitions:

Billable Hours

The amount of an employee's work time that can be charged to a client, often used in legal and consultancy services to calculate fees.

Net Income

The remaining earnings of a business after subtracting all expenses, taxes, and costs from the gross revenue.

Profit Sharing

A company policy where employees receive a share of the company's profits based on its earnings, serving as an incentive and reward for employee performance.

Billable Hours

The amount of an employee's work time that can be charged to a client, commonly used in professional services like law and consulting.