Question

Consider the market for oil. Suppose for simplicity that there are only two oil producing countries-Saudi Arabia and Kuwait. Both countries must choose whether to produce a low output or a high output These output strategies with corresponding profits are depicted in the payoff matrix to the right. Kuwait's profits are in red and Saudi Arabia's are in blue. Kuwait Suppose the two countries form a cartel. What is the cooperative equilibrium? Low Output High Output A. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output $100 $70 Low Output $8 $13 B. A cooperative equilibrium does not exist for this game. C. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output. Saudi Arabia $88 $75 D. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output High Output $5 $8 E. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low output

What is the Nash equilibrium for this​ game?

A.

A Nash equilibrium does not exist for this game.

B.The Nash equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output

C.The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output.

D.

The Nash equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low output.

E.

The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output.

Answer 1

The nash equilibrium of this game is both the nations producing a high output that will ensure Qatar getting a payoff of $8 and Saudi getting a payoff of $75, Qatar will produce low because that will reduce the payoff to $5 that is less than previous return and Saudi will not produce less because that will reduce the payoff to $70.

The answer is "C".

If they form a cartel then also the answer is "C".