Newfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.

Newfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.7P

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Assume the following game situation: If Player A plays UP and Player B plays LEFT then Player A gets $1 and Player B gets $3. If Player A plays UP and Player B plays RIGHT then Player A gets $2 and Player B gets $5. If Player A plays DOWN and Player B plays LEFET then Player A gets $4 and Player B gets $2. If Player A plays DOWN and Player B plays RIGHT then Player A gets $1 and Player B gets $1 What is the Mixed Strategy Equilibrium for Player B? O. (LEFT, RIGHT) = (1/8, 3/8) O. (LEFT, RIGHT) = (1/4, 3/4) O. (LEFT, RIGHT) = (1/2, 1/2) O. (LEFT, RIGHT) = (3/8, 1/8)
Suppose that player 1 (row) and player 2 (column) play a simultaneous game. Player 1 can choose to go out (Go) or stay at home (Stay). Player 2 can then choose whether to buy tickets to the movies (Movie), to the basketball game (Game) or not buy tickets (None). This game is shown below. Player 1(row) Player 2 (column) Movie Game None Go (6, 4) (4, 6) (0, 0) Stay (2, - 2) (2, - 4) (3, 3) What is the Maxi-Min strategy for player 1 and for player 2? Explain why. What are the Nash equilibrium or equilibria for this game? Explain why. What kind of game is this? Argue what is the most likely outcome.
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Suppose that U.S.-based Qualcomm and European-based T-Mobile are contemplating infrastructure investments in a developing mobile telephone market. Qualcomm currently uses a code-division multiple access (CDMA) technology, which almost 67 million users in the United States utilize. In contrast, T-Mobile uses a global systems for mobile communication (GSM) technology that has become the standard in Europe and Asia. Each company must (simultaneously and independently) decide which of these two technologies to introduce in the new market. Qualcomm estimates that it will cost $1.2 billion to install its CDMA technology and $2.0 billion to install GSM technology. T-Mobile’s projected cost of installing GSM technology is $1.1 billion, while the cost of installing the CDMA technology is $2.7 billion. As shown in the accompanying table, each company’s projected revenues depend not only on the technology it adopts, but also on that adopted by its rival. Determine the Nash equilibrium/equilibria…
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