2. Suppose two oil-producing countries Country A and Country B, in a $1 bil market are interested in forming a cartol wi

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2 Suppose Two Oil Producing Countries Country A And Country B In A 1 Bil Market Are Interested In Forming A Cartol Wi 1 (28.56 KiB) Viewed 25 times

2. Suppose two oil-producing countries Country A and Country B, in a $1 bil market are interested in forming a cartol with the goal of colluding a signed agrement to raise oil prices and profits) by limiting quantity supplied to a low level. Suppose, in cach play of the game, their individual options are other to collude (Co) stick to the low quantity agreement or to cheat (Ch) - and produce a high quality, looding the market and capturing additional revenues. The matrix form is shown in the following figure Country B Со Ch Со $2,52 0,54 Country A Ch $4,50 $1,51 Frage 2 - a What is Country A's best response to Country B's choice to limit supply collude)? .b What is the (Pure Strategy) Nash equilibrium of this game it played only one period (be specific as to why? • What famous form does this game fake? - Is there a Pareto efficient outcome of the game? . d. If this game is commonly expected to last for exactly 3 periods, will the two firms be able to sustain collusion? Why or why not? e if this game were commonly expected to last indefinitely would the two firms be able to sustain collusion? Why or why not?