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X Quiz: Quiz 8 enver.instructure.com/courses/64153/quizzes/306584/take In class, we analyzed how two countries (Saudi Arabia and Iran) producing oil would behave depending on whether they are
X Quiz: Quiz 8 enver.instructure.com/courses/64153/quizzes/306584/take In class, we analyzed how two countries (Saudi Arabia and Iran) producing oil would behave depending on whether they are competing against each other or they are colluding and forming a cartel. Depending of their strategic behaviors, we have identified the payoffs for each country: IRAN Compete Collude 1200 1392 Compete SAUDI 1200 1305 ARABIA 1305 Collude 1350 1350 1392 In class. we have determined that. in a one-round setting. because each country expected the other to renege on the collusion agreement. they will both elect to compete against each other. The Nash equilibrium would be (Compete, Compete). We have also determined that game theory predicts that when the game is repeated infinitely the equilibrium will be (Collude. Collude). However, as we have determined in last week class. it depends of the discount rate
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