What is the equilibrium outcome of this game

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Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC cooperate and stick to the agreement, then Mexico will earn profits of $100 million and OPEC will earn profits of $200 million. If both Mexico and OPEC cheat, then Mexico will earn $80 million and OPEC will earn $175 million. If only Mexico cheats, then Mexico earns $110 million and OPEC earns $150 million. If only OPEC cheats, then Mexico earns $60 million and OPEC earns $185 million.

a. Draw the payoff matrix for this two-player game. (Hint: The strategies are Cooperate and Cheat.)

b. What is the equilibrium outcome of this game?

c. Does this game satisfy the definition of a prisoners' dilemma? Briefly explain.

Reference no: EM133334869

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