Business, 13.05.2021 20:20 yurlgurllmay

Two companies own adjacent natural gas fields. Under the two fields is a common pool of natural gas worth $100 million. Drilling a well costs $10 million, and each company can drill either 1 or 2 wells. Two wells is sufficient to extract all the gas, and the gas is split between the companies based on how many wells they've drilled: if each company has one or two wells, they each get 50%, but if one company has two wells and the other has only one, then the company with two wells gets two thirds of the gas and the company with one well gets only one third. A socially optimal solution would be for each company to drill : a. 2 wells, but the Nash equilibrium is for one company to drill 1 well and the other company to drill 2 wells
b. 2 wells, but the Nash equilibrium is for each company to drill i well.
c. 1 well, and the Nash equilibrium is for each company to drill one well
d. 1 well but the Nash equilibrium is for each company to drill two wells

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Two companies own adjacent natural gas fields. Under the two fields is a common pool of natural gas...

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