Business, 17.07.2020 17:01 edwardordonez66
Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.
If each firm is permitted to drill two wells at most, the firms are in a Nash equilibrium when:.
a. both firms drill one well.
b. BQ drills one well and Exxoff drills two wells.
c. BQ drills two wells and Exxoff drills one well.
d. both firms drill two wells.
Answers: 1
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Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common...
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