EP ECONOMICS,AP EDITION-CONNECT ACCESS
EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 8, Problem 11DQ
To determine

Self-interest behavior.

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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.
4. Consider a three-player bargaining, where the players are negotiating over a surplus of one unit of utility. The game begins with player 1 proposing a three-way split of the surplus. Then player 2 must decide whether to accept the proposal or to substitute for player 1's proposal his own alternative proposal. Finally, player 3 must decide whether to accept or reject current proposal (it is player 1's if player 2 accepts or player 2's if player 2 offer a new one). If he accepts, then the players obtain the specified shares of the surplus. If player 3 rejects, then the players each get 0. (a) Draw the extensive form game of this perfect-information game. (b) Determine the subgame perfect NE.
10. Player A and Player B are playing a game . First , Player A chooses to either " Keep " or " Pass " . Second , Player B observes A's choice and Player B then chooses to either Keep or Pass . This process continues which creates the sequential game below . Please mark decisions that rational and selfish players will choose at every decision node ( 3 decisions by player A and 3 decisions by player B ) - mark them on the Figure . What is the equilibrium of this game ?
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