dolution
dolution.
Refer to Figure 14.5. Consider the entries in the row of the payoff matrix that correspond to Saudi Arabia choosing “Low Output.†Suppose the numbers change so that Nigeria’s profit is $15 million when Nigeria chooses “Low Output†and $10 million when it chooses “High Output.â€
a. Create the payoff matrix for this new situation, assuming that Saudi Arabia and Nigeria choose their output levels simultaneously. Is there a Nash equilibrium to this game? If so, what is it?
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Order Paper Nowb. Draw the decision tree for this situation (using the values from the payoff matrix you created in part (a), assuming that Saudi Arabia and Nigeria make their decisions sequentially: First, Saudi Arabia chooses its output level, and then Nigeria responds by choosing its output level. Is there a Nash equilibrium in this game? If so, what is it?
c. Compare your answers to parts (a) and (b). Briefly explain the reason for any differences in the outcomes of these two games.
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