Business, 18.08.2019 00:20 Dragonskeld
Mexico and opec both produce crude oil. realizing that it would be in their best interest to form an agreement on production goals, a meeting is arranged and an informal verbal agreement is reached. if both mexico and opec stick to the agreement, opec will earn profits of $200 million and mexico will earn profits of $100 million. if both mexico and opec cheat, then opec will earn $175 million and mexico will earn $80 million. if only opec cheats, then opec earns $185 million and mexico $60 million. if only mexico cheats, then mexico earns $110 million and opec $150 million.
a. what is the dominant strategy for opec? b. what is the equilibrium in this game? c. now suppose mexico picks its strategy first and opec knows what it will choose. opec told mexico that in the event mexico cheats on the agreement, opec will cheat as well but if mexico does not cheat, neither will opec. now what is the outcome of the game?
Answers: 1
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