Scenario 17-2

Scenario 17-2.Imagine that two oil companies,Lexxon and PB,own adjacent oil fields.Under the fields is a common pool of oil worth $48 million.Drilling a well to recover oil costs $4 million per well.If each company drills one well,each will get half of the oil and earn a $20 million profit ($24 million in revenue - $4 million in costs) .Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.
-Refer to Scenario 17-2.PB's dominant strategy would lead to what sort of well-drilling behavior?

A) PB will never drill a second well.
B) PB will always drill a second well.
C) PB will drill a second well only if Lexxon drills a well.
D) PB will drill a second well only if Lexxon does not drill a well.

Correct Answer:

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