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Assume that OPEC is made up of only two countries— Saudi Arabia and Kuwait. Each country can produce one unit of crude oil (a million barrels) at a cost of $1 million. The price of crude oil is determined by market demand, which is given by the following formula: Price = 10 – (QS + QK), where QS is the number of units produced by Saudi Arabia (S), and QK is the number of units produced by Kuwait (K). Suppose this is a one shot game. Also assume that Saudi Arabia and Kuwait each chooses either 2 or 3 units.

(a) Illustrate this game using a game table and find the Nash equilibrium.

Suppose now Saudi Arabia chooses either 4 or 5 units; Kuwait chooses either 1 or 2 units. All other conditions remain the same. It is still a one-shot game

(b) Illustrate this game using a game table and find the Nash equilibrium.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91876249

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