Table 14-3 Suppose OPEC Has Only Two Producers, Saudi

question 66

Multiple Choice

Table 14-3 Suppose OPEC has only two producers, Saudi Arabia and Nigeria. Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria. The payoff matrix in Table 14-3 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 14-3. What is the Nash equilibrium in this game?

• A) In the Nash equilibrium, both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively.
• B) In the Nash equilibrium, both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively.
• C) In the Nash equilibrium, Saudi Arabia produces a low output and earns a profit of $80 million and Nigeria produces a high output and $30 million respectively.
• D) There is no Nash equilibrium.

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