Consider the market for oil Suppose for simplicity that ther

Consider the market for oil. Suppose for simplicity that there are only two oil producing countries-Saudi Arabia and Kuwait. Both countries must choose whether to produce a low output or a high output. These output strategies with corresponding profits are depicted in the payoff matrix to the right. Kuwait\'s profits are in red and Saudi Arabia\'s are in blue Suppose the two countries form a cartel. What is the cooperative equilibrium? The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output. A cooperative equilibrium does not exist for this game A. B. he cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low outpuft. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output. D. E. hat is the Nash equilibrium for this game? . The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output. A Nash equilibrium does not exist for this game. C. The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output. D. The Nash equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output E. The Nash equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low output

Solution

Ans

1 low and low output. It results in maximum profit of 125+12=137.They can then share it according to the agreement reached earlier

2 high high output. So A is right Answer. The reason is it leads both not to change their decision given the decision of rival