5. Suppose that two oil companies - BP and Exxon - own adjacent natural gas fields. Theprofits that each firm earns depends on both the number of wells it drills and the number ofwells drilled by the other firm. The table below lists each firm's individual profits:ЕxxonDrill one wellDrill two wellsDrill one well S10 million, $10 million $6 million, $12 millionBP Drill two wells S6 million, $12 million$8 million, $8 millionBremSea. Does BP have a dominant strategy? If yes, describe it.b. Does Exxon have a dominant strategy? If yes, describe it.c. Is there a Nash equilibrium? If yes, describe it.d. Suppose BP and Exxon can collude, what will be their choices?

We are going to find mixed strategy nash equilibrium to answer this question.

5. Suppose that two oil companies - BP and Exxon- own adjacent natural gas fields. The profits that each firm earns depends on both the number of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits: Exxon Drill two wells Drill one well Drill one well S10 million, $10 million S6 million, S12 million BP Drill two wells S6 million, $12 million S8 million, $8 million eSe a. Does BP have a dominant strategy? If yes, describe it. b. Does Exxon have a dominant strategy? If yes, describe it. c. Is there a Nash equilibrium? If yes, describe it. d. Suppose BP and Exxon can collude, what will be their choices?

5. Suppose that two oil companies - BP and Exxon- own adjacent natural gas fields. The profits that each firm earns depends on both the number of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits: Exxon Drill two wells Drill one well Drill one well S10 million, $10 million S6 million, S12 million BP Drill two wells S6 million, $12 million S8 million, $8 million eSe a. Does BP have a dominant strategy? If yes, describe it. b. Does Exxon have a dominant strategy? If yes, describe it. c. Is there a Nash equilibrium? If yes, describe it. d. Suppose BP and Exxon can collude, what will be their choices?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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