Question

Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. The two strategies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement. If both countries comply, the economic profit for each will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country will have an economic loss of $10 million. If all countries cheat, they break even. What is the outcome of this game if it is only played once

Answer 1

The outcome of this game is that both countries will cheat

Step-by-step explanation:

Solution

Recall that

For Russia:

If Qatar cheats or found cheating is = zero cheat

If Qatar co-operates = 140 million (co-operates or comply)

For Qatar:

If Russia cheats or found cheating is = it is considered as a zero cheat

If Russia cooperates = 140 million (co-operates or comply)

So,

The outcome of equilibrium = (0,0)

Therefore the outcome of this game is that both countries will cheat

Note: Kindly find an attached copy of part of the solution to the question given.