Answer all parts... 2 Suppose hwo oil-producing countries, Country A and Country B, in a $4 bil market are interested in forming a cartol with the goal of colluding -a signedagroement to raise oil prices (and protits) by limiting quantity supplied to a low lovel. Suppose, in oach play of the game, their individual options are eitherto collude (Co)-stick to the low quantity agreement-or to cheat (Ch)-and produce a high quantity, looding the market and capturing additionalrevenues The matrix form is shown in the folowing figureCountry BCoChCo$2,520,54Country ACh$4,50$1,$1a 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 if played only one period (be specific as to why)?.c What famous form does this game take?.c 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?

Nash equilibrium is a concept within game theory where the optimal outcome of a game is where there…

Country A Ch $4,50 $1,$1 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)? .c What famous form does this game take? c 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?

Country A Ch $4,50 $1,$1 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)? .c What famous form does this game take? c 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?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.9P

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