(Solved):   2. Imagine that two oil companies, A and B, own adjacent oil fields. Under the fields is a ...

 

2. Imagine that two oil companies, A and B, own adjacent oil fields. Under the fields is a common pool of oil worth \( \$ 48 \) million. Drilling a well to recover oil costs \( \$ 2 \) million per well. If each company drills one well, each will get half of the oil and earn a \( \$ 22 \) million profit (\$24 million in revenue minus \( \$ 2 \) million in costs). Assume that having \( X \) percent of the total wells means that a company will collect \( X \) percent of the total revenue. Suppose each firm can choose between drilling one or two wells. a. (4 points) Complete the payoff matrix below. (Unit: millions) b. (2 points) What is the reasonable outcome of this game?