OPEC Experiment

1
OPEC Experiment

• Take aways

2
How to bid in the auction

• There exists an inside option Kuwait.
• Maximum bid should consider this.
• Buthow can we value each country?
• What is the likelihood that collusion will
  succeed?
• Should I be the leader?
• How long it will last?
• How do I feel about the end of the game?
• Smaller countries were sold really cheap!!!

3
How to foster collusion

• Trade off between clarity and efficiency
• Easy rules to follow (74) or optimal rules
• Different percentages to avoid differential
  temptation.
• Trade off between large coalition and
  sustainability
• Smaller countries want to cheat difficult to
  detect and big temptation.
• Collusion usually is sustained by big players.
• Leaders and incentives should be aligned
• Effort by those that are profitable to the
  coalition are more important than marginal
  players efforts.

4
How to lead cooperation

• Executing the plan requires players to agree on
  something
• Incentives are very different for different
  players.
• Sometimes is a good idea to leave some behind
  (Kuwait) and focus on those that matter (Saudi
  Arabia).
• Clear and proportional threats are not enough we
  need leadership
• Trust and information.