Oil Giant and Local Oil are the only two producers in a market, as shown in Figure

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Oil Giant and Local Oil are the only two producers in a market, as shown in Figure 15P-5. They have an agreement to restrict oil output in order to keep prices high.
a. What is the dominant strategy for each player?
b. If this game is played once, what is the Nash equilibrium?
c. Now suppose that both players know that the game will be played multiple times. What outcome would we expect?
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Microeconomics

ISBN: 978-1259163531

1st edition

Authors: Dean Karlan, Jonathan Morduch

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