Business, 19.08.2020 22:01 dannaasc3282

Suppose two companies own adjacent oil fields, beneath which is a common pool of oil worth $30 million. For each well that is drilled, the company that drills the well incurs a cost of $3 million. Each company can drill one or two wells. Firms' revenues are proportional to their share of the total number of wells drilled; for example, if three wells have been drilled total of which one firm has two. it gets two- thirds of the oil revenues, or $20 million (gross). What is the likely outcome of this game if each company pursues its own self-interest? a. One company drills two wells and experiences a profit of $14 million; the other company drills one well and experiences a profit of $7 million.
b. Each company drills one well and experiences a profit of $15 million.
c. Each company drills two wells and experiences a profit of $9 million.
d. Each company drills one well and experiences a profit of $12 million.

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Suppose two companies own adjacent oil fields, beneath which is a common pool of oil worth $30 milli...

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