The U.S. government has decided to build a new off ramp for Interstate 5 in California. Exxon and Shell are both interestedin building a gas station near the new off ramp. They can build the gas station near the off ramp for northbound traffic orthey could build the gas station near the off ramp for southbound traffic. The profits for each outcome are illustrated in theaccompanying payoff table:ShellShellnorthboundsouthboundExxon receivesExxon receives$60,000 profit$110,000 profitExxon northboundShell receivesShell receives$50,000 profit$100,000 profitExxon receivesExxon receives$80,000 profit$50,000 profitExxonsouthboundShell receivesShell receives$120,000 profit$50,000 profita. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously.Exxon builds southbound and Shell builds southbound.Exxon builds northbound and Shell builds southbound. a. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously.Exxon builds southbound and Shell builds southbound.Exxon builds northbound and Shell builds southbound.Exxon builds southbound and Shell builds northbound.Exxon builds northbound and Shell builds northbound.b. Use the information in the payoff table to create a game tree for this sequential move game. This part is not graded, butyou will need to make the game tree on your own to answer the following questions.c. The Nash equilibrium for the sequential move game where Exxon moves first is that Exxon buildsnorthboundand Shell buildsnorthboundsouthboundsouthboundNow suppose thatand builds a gas station before Exxon.d. The Nash equilibrium for the sequential move game where Shell moves first is that Shell buildsandnorthboundExxon buildsnorthboundsouthbound

There are two players : Exxon & Shell Strategy Set of Exxon = Strategy Set of Shell = {…

Answered: The U.S. government has decided to…

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.3P