-Consider the noncooperative oil-drilling game depicted in Figure 5.4 in which payoffs are in millions of dollars. If this game is played five times, the Nash equilibrium strategy profile for this game in the fifth round is:
A) {Narrow, Narrow}.
B) {Narrow, Wide}.
C) {Wide, Narrow}.
D) {Wide, Wide}.

Question

-Consider the noncooperative oil-drilling game depicted in Figure 5.4 in which payoffs are in millions of dollars. If this game is played five times, the Nash equilibrium strategy profile for this game in the fifth round is:
A) {Narrow, Narrow}. 
B) {Narrow, Wide}. 
C) {Wide, Narrow}. 
D) {Wide, Wide}.

Quizplus · Accepted Answer

In a repeated game scenario, players tend to follow a tit-for-tat strategy or similar strategies that encourage cooperation to maximize their overall payoff over multiple rounds. However, in the final round of such a game, players have no incentive to cooperate because there is no future retaliation for choosing a non-cooperative strategy. Thus, in the final round, both players will choose their dominant strategy, which, in many non-cooperative games like the oil-drilling game, is to choose the option that maximizes their own payoff regardless of the other player's choice. Assuming "Wide" represents a strategy that maximizes individual payoff without regard to the other player's choice, both players will choose "Wide" in the final round, leading to the Nash equilibrium of {Wide, Wide}.

-Consider the Noncooperative Oil-Drilling Game Depicted in Figure 5