-Figure 221 Summarizes a Static Game Involving Three Oil Companies That

Multiple Choice

-Figure 2.21 summarizes a static game involving three oil companies that have purchased leases on land lying above the same crude oil deposit. Each oil company must decide whether to drill a wide or a narrow well. All payoffs are in millions of dollars. Suppose that the U.S. government wishes to encourage the development of narrow drilling technology. It does this by offering each company a $5 million production subsidy to drill narrow wells. The payoff matrix includes this subsidy. If larger payoffs are preferred, the Nash equilibrium strategy profile for this game is:
I. {Wide, Wide, Narrow}.
II. {Narrow, Wide, Wide}.
III. {Narrow, Wide, Narrow}.
IV. {Narrow, Narrow, Wide}.
V. {Wide, Narrow, Narrow}.
Which of the following is correct?

A) I, II, and III only.
B) II, III, and IV only.
C) I, III, and IV only.
D) III, IV and V only.
E) This game does not have a Nash equilibrium strategy profile.