Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit $72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. If BQ and Exxoff are able to successfully cooperate to maximize their joint profits, how much each firm will earn? Find the dominant strategy of each firm, what is Nash equilibrium? IS THIS PRISONER'S DILEMMA GAME? Rochelle and Alec, own wells that produce safe drinking water. They bring the water to town and sell it at whatever price the market will bear. Suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. If Two firms operate as a profit-maximizing monopoly in the market, what price will they charge? a. $25 b. $30 c. $35 d. $40 If two firms operate as a profit-maximizing monopoly in the market, how much profit will each of them earn? a. $8,050 b. $8,500 c. $9,000 d. $18,000 If they are unable to cooperate. What will be the price once Rochelle and Alec reach a Nash equilibrium? a. $15 b. $20 c. $25 d. $30 How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium? a. 600 b. 700 c. 800 d. 900 Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit $72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. If BQ and Exxoff are able to successfully cooperate to maximize their joint profits, how much each firm will earn? Find the dominant strategy of each firm, what is Nash equilibrium? IS THIS PRISONER'S DILEMMA GAME? Rochelle and Alec, own wells that produce safe drinking water. They bring the water to town and sell it at whatever price the market will bear. Suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. If Two firms operate as a profit-maximizing monopoly in the market, what price will they charge? a. $25 b. $30 c. $35 d. $40 If two firms operate as a profit-maximizing monopoly in the market, how much profit will each of them earn? a. $8,050 b. $8,500 c. $9,000 d. $18,000 If they are unable to cooperate. What will be the price once Rochelle and Alec reach a Nash equilibrium? a. $15 b. $20 c. $25 d. $30 How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium? a. 600 b. 700 c. 800 d. 900
