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If OPEC consisted of only Saudi Arabia and Nigeria and if they both stuck to an agreement to fix oil prices, then Saudi Arabia would
If OPEC consisted of only Saudi Arabia and Nigeria and if they both stuck to an agreement to fix oil prices, then Saudi Arabia would make $100 profit and Nigeria would make $60 profit. If both cheated on the agreement, Saudi Arabia would make $70 and Nigeria would make only $30. If Saudi Arabia cheated and Nigeria did not, then Nigeria would make $25 and Saudi Arabia would make $80. Likewise, if Nigeria cheated and Saudi Arabia did not, then Nigeria would make $75 and Saudi Arabia would make $50.
- Does either country have a dominant strategy?
- Does a Nash equilibrium exist in this case? Explain.
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