Suppose OPEC has only two producers, Saudi.Arabia and Nigeria. Saudi.Arabia has

Question

Suppose OPEC has only two producers, Saudi.Arabia and Nigeria. Saudi.Arabia has far more oil reserves and is the lower cost producer compared to Nigeria. The payoff matrix in the table to the right shows lie 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. Is there a dominant strategy for Nigeria and, if so: what is it? Yes, the dominant strategy is to produce a low output. Yes, the dominant strategy is to produce a high output. Yes, it has a dominant strategy depending on what Saudi.Arabia does. No, there is no dominant strategy.

Explanation / Answer

(Q)Is there a dominant strategy for Nigeria and, if so, what is it?

Answer:

B. Yes, the dominant strategy is to produce a high output

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