1. As reported in the Wall Street Journal in November 2016, the 11countries that make up the oil cartel OPEC agreed to each cut theiroil production over 2017 by 2% in an effort to raise the price ofoil and increase their profits (since the demand for oil isinelastic). Let’s use a simplified one-off game with only twocountries (Iran and Saudi Arabia) to analyze the strategicinteraction between the countries and the likely impact on oilrevenues of their agreement. Suppose that each country can produceeither a high or a low quantity of oil:

• If both countries reduce oil production to the low quantity,Iran earns 86 billion and Saudi Arabia earns 126 billion inprofits.
• If Iran produces the high quantity and Saudi Arabia the otherthe low quantity, Iran earns 142 billion in profits and SaudiArabia loses 29 billion.
• If Saudi Arabia produces the high quantity and Iran the otherthe low quantity, Saudi Arabia earns 202 billion in profits andIran loses 17 billion.   
• If both produce the high quantity Iran earns profits of 5billion and Saudi Arabia earns 12 billion in profits.

1. Fill in the payoff matrix for this game. Be sure to carefullylabel each country’s strategies.

	Iran’s Decision
                                Saudi Arabia’s Decision

1. Identify each country’s dominant strategy (if there is one) andprovide a 1-2 sentence explanation supporting your choice(s). Whatis this game’s Nash equilibrium

1. Is there an outcome that would be better for both countriesthan the Nash equilibrium? If so, could it be achieved if this wasa repeated game rather than a one-off game as above? Support youranswer with no more than two sentences.