GAME THEORY AND 2x2 STRATEGIC GAMES APPLIED FOR MODELING OIL AND GAS INDUSTRY DECISION-MAKING PROBLEMS

ABSTRACT Oil and gas resources have been considered valuable assets, associated with potential conflicts due to distinct interests of many agents involved in their exploration, such as producing and consuming countries, governments and companies. These conflicts can show up under many situations and market conditions, such as partnerships, joint development, optimal outputs and reserve maximization. Game theory is known as a methodology that improves the decision-making processes by better understanding the players’ specific motivations, strategic interactions and payoff estimation. A widely used framework for modeling social and economic phenomena is the 2 x 2 strategic games, of which include classical forms such as Prisoner’s Dilemma, Stag Hunt, and Battle of Sexes. Therefore, this paper proposes to examine relevant realistic and real-world cases of the oil and gas industry in the form of 2 x 2 strategic games, aiming to investigate game theory approaches to aid in the discussion and resolution of the main dilemmas faced.