Social Interactions

Consider two gas mining companies that own adjacent gas fields. Under the fields is a common resource of gas worth $12 million. Drilling a well to recover the gas cost $1 million. If each company drills one well, each will get half of the gas reserves and earn $5 million in profit. But as it is a common reserve if one company has two wells that company gets two thirds of the gas, giving a $6 million profit. If both perform this profits fall to $4 million. The game is represented in the following table:

Company B Drill two wells Drill one well Drill two wells A gets $4 M A gets $6 M Company A B gets $4 M B gets $3 M Drill one well A get $3 M A gets $5 M B gets $6 M B gets $5 M