Table 11-8 Suppose OPEC Has Only Two Producers, Saudi Arabia

Table 11-8
Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 11-8 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 11-8.What is the Nash equilibrium in this game?

A) In the Nash equilibrium both Saudi Arabia and Ecuador produce a low output and earn a profit of $100 million and $15 million respectively.
B) In the Nash equilibrium both Saudi Arabia and Ecuador produce a high output and earn a profit of $60 million and $15 million respectively.
C) In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million and Ecuador produces a high output and earns a profit of $22 million.
D) There is no Nash equilibrium.

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