Consider the information below to answer the following three questions. (15 points)

Imagine that two oil companies--Exxon and Texaco--own adjacent oil fields.Under the fields is a common pool of oil worth $12 million.Drilling a well to recover the oil costs $1 million.If each company drills one well, each will get half of the oil and earn a $5 million profit($6 million in revenue minus $1 million in costs).Further suppose that either company could drill a second well.If one company has two of the three wells, that company gets two-thirds of the oil, which yields a profit of $6 million.The other company gets one-third of the oil, for a profit of $3 million.Yet if each company drills second well, the companies again split the oil.In this case, each bears the cost of a second well, so profit is only $4 million for each company.

1. Develop a payoff matrix showing profits for companies whether they decide to drill one well or two wells.
2. Determine the dominant strategy for(i)Exxon,(ii)Texaco.
3. Suppose you are the manager of Exxon.What would you do? Givereason for your answer.