Reference no: EM133202934

Violating collaborative decisions is a main concern in Game Theory. What kind of punishment can be imposed and implemented? However, violations can go both ways causing global problems. What corrective actions and punishment can be designed and what is our role in the process? Let us consider the global gas crisis fueling inflation and the game theory's textbook example: OPEC

In Oct 3, 2018, Reuters reported the following:

"Iran accused Saudi Arabia and Russia on Wednesday of breaking OPEC's agreement on output cuts by producing more crude, adding that the two countries would not be able to produce enough oil to make up for a reduction in Iranian exports. Reuters reported on Wednesday that Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers. U.S. sanctions on Iran's petroleum sector are set to take effect next month after U.S. President Donald Trump withdrew from the Iran nuclear deal in May. Washington wants to cut Iran's oil exports to zero by November, and is encouraging producers such as Saudi Arabia, other OPEC members and Russia to pump more to meet the shortfall."

However, these days we have a different problem at hand.

In its July 29, 2022, Reuters reported the following:

"MOSCOW, July 29 (Reuters) - The OPEC+ group produced almost 3 million barrels per day less crude than foreseen by its quotas in June as sanctions on some members and low investment by some others crippled its ability to assuage the worlds energy crisis, a report showed Friday. The development is a further setback for the U.S. administration of Joe Biden, which had been hoping that OPEC could raise output to compensate for Russian supply disruptions and slow down rising fuel costs and broader inflation. Russian Interfax news agency, citing a source familiar with the data, said level of underproduction by OPEC+ jumped to 320% in June from 256% in May and 220% a month earlier. It also said that the OPEC+ group's combined oil underproduction from the planned levels was 2.84 million barrels per day last month."

In your opinion, even though the US is not part of OPEC+, should we play a role in achieving our goals and solving the global crisis by using punishments and incentives to ensure collaborative outcomes? If so, how should we affect the payoffs of the game to ensure socially optimum results?