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Suppose two companies own adjacent oil fields. under the two fields is a common pool of oil worth $60 million. for each well that is drilled, the company that drills the well incurs a cost of $4 million. each company can drill up to two wells. what is the likely outcome of this game if each company pursues its own self-interest?
a. each company drills one well and experiences a profit of $26 million.
b. each company drills one well and experiences a profit of $22 million.
c. each company drills two wells and experiences a profit of $22 million.
d. one company drills two wells and experiences a profit of $32 million; the other company drills one well and experiences a profit of $16 million.

Answer :

takahiro
For the answer to the question above, I think the answer is
$60 million divided by two companies
is $30 miilion

then less the well incurs at cost of $4 million.

So each company drills one well and experiences a profit of $26 million.


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