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TEXplor secured a two-year lease on land adjacent to the land that was leased by Clampett. The land leased by TEXplor is located on the same oil depots.
Question: Domestic demand (D) and supply (S) for wine, respectively, are given by D = 14 - P and S = P - 4 (where P is the price of wine). The household is a small open economy (SOE) and faces the world price of 6. 1. TEXplor secured a two-year lease on land adjacent to the land that was leased by Clampett. The land leased by TEXplor is located on the same oil depots. Suppose each firm sinks wells of the same size at the same time. If both companies flooded large wells, they would each extract 2 million barrels in 6 months, but each company would receive a profit of only one million global gas companies. On the other hand, if each company sank a tight well, it would take Clampett and TEXplor a year to extract their respective shares, but each would have profits of 14 million GHC each. Finally, if one company drilled a wide well while the other drilled a narrow well, the first company would extract 3 million barrels and the second only one million. In this case, the first company would make a profit of 16 million Gulf Gas companies and the second company would lose 1 million helicopters.
1. Does any firm have a strictly dominant strategy? If so, what are these strategies?
2. What is the strategy that each company will adopt?
3. Is this game buggy?
4. Is collusion possible in this game?
Answer:
1. None of the players in this game have a dominant strategy. The dominant strategy is the course of action that results in the highest reward for the player, regardless of what the other player does. The highest bonus for every player in this game is $ 16 million. But that depends on what the other player is doing. Since the decision here is one time, there is no dominant strategy.
2. The safest strategy for each company is for both companies to drill narrow pits. The reward here for both of them is 14 million winnings.
3. This game does not contain a nash equilibrium. A Nash equilibrium occurs when no player is able to win a one-sided change in their strategy. But in this game, whatever strategy we choose, it might be better for one of the players.
4. Collusion is possible in this game. If both players decide in advance to dump the narrow pots, they can each guarantee that they will not incur any losses and make a profit of 14 million.
1. None of the players in this game have a dominant strategy. The dominant strategy is the course of action that results in the highest reward for the player, regardless of what the other player does. The highest bonus for every player in this game is $ 16 million. But that depends on what the other player is doing. Since the decision here is one time, there is no dominant strategy.
2. The safest strategy for each company is for both companies to drill narrow pits. The reward here for both of them is 14 million winnings.
3. This game does not contain a nash equilibrium. A Nash equilibrium occurs when no player is able to win a one-sided change in their strategy. But in this game, whatever strategy we choose, it might be better for one of the players.
4. Collusion is possible in this game. If both players decide in advance to dump the narrow pots, they can each guarantee that they will not incur any losses and make a profit of 14 million.
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