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To: diana g who wrote (39953)	3/14/1999 9:51:00 PM
From: Razorbak	Respond to of 95453

Costs vs. Benefits of Defecting <<I think the difference of opinion here is on this point --- You think that the producers will see defecting to be in their best interest as individuals. I believe that they will cooperate (not cheat) because they recognize that the cost of non-compliance is greater than the benefit of non-compliance.>> Diana: You're absolutely correct. Individual decisions will be based upon perceived costs versus benefits. Unfortunately, OPEC's history suggests that rampant cheating has almost always occurred. Perhaps the situation will be different this time, but I wouldn't bet on it. JMHO, of course. Good luck on your investments. Razor

To: diana g who wrote (39953)	3/14/1999 10:32:00 PM
From: Mike from La.	Read Replies (2) \| Respond to of 95453

Diana, Good analytical thinking. EOM

To: diana g who wrote (39953)	3/15/1999 10:39:00 AM
From: Pete Young	Read Replies (1) \| Respond to of 95453

Re: The prisoner's dilemma Diana you stated that To use the police analogy --- If the police offer one suspect a two year sentence if he talks, and he faces 30 years if he does not but his partner does talk, then he is much more likely to talk than if they offer him 25 years versus the same 30 (and freedom in all cases if neither talks.) However, that analogy, as to the rewards of "silence", may be understating the situation. Look at the case of SA, if other members cheat significantly, SA can practically kick them all into hell (witness Equador recently) by pumping $5/b until they swear compliance, if it so chooses. (Refer to the Economist's recent article on the benefits that accrue to SA in the $5 oil scenario.) In the analogy, this would mean in this large group of prisoners, one prisoner has the power to sentence the others to death, and actually benefit by doing so, no matter what the others do or don't do. This is just one (improbable) outcome of a cheating scenario. A more middle ground might assume a moderate and inconsistent level of cheating by members...an occasional yanking of the lion's tail, but this could disinigrate into a "tragedy of the commons" situation rather quickly if the compliant members percieve that cheaters derive benefits with no repercussions. (Other than the sword hanging over all members heads in the form of the threat of unlimited pumping.) The only stable resolution of this situation is a rebounding of world demand, IMHO. And I'm not at all sure we can assume that is happening--yet. Pete