The payoffs to each firm (in billions of dollars) and an extensive form game between BP and Shell are shown in the figure. BP has 20 percent of the U.S. gasoline market share and Shell has 16 percent market share. BP and Shell are attempting to determine whether to send geologists to explore Oil Track 20.
a) Is there a dominant strategy for Shell? What is the dominant strategy, if any, for Shell? (b) What is the Nash equilibrium or equilibria in this game? (c) Use the above information to advise BP on whether they should pursue a merger with Shell.