According to an article in The Economist, new technology has led to significant overfishing even though fishermen generally understand the risks of overfishing. Consider two countries, Iceland and Canada, fishing in the same waters. Each country is considering banning the new technology, but each country can only ban the new technology for its own domestic fishermen. The most preferred outcome for Canada would be for both countries to ban the new technology. The second most preferred outcome for Canada would be if Canada did not ban the technology but Iceland did. The third most preferred outcome for Canada would be if neither country banned the new technology. The least preferred outcome for Canada would be if Canada banned the new technology but Iceland did not. Iceland has the exact same preferences as Canada. Draw a 2x2 game to represent this situation and find the Nash Equilibria. Also make sure that you label the players, actions, and payoffs. Show all of your work.

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Business

Elias

26 March, 21:13

According to an article in The Economist, new technology has led to significant overfishing even though fishermen generally understand the risks of overfishing. Consider two countries, Iceland and Canada, fishing in the same waters. Each country is considering banning the new technology, but each country can only ban the new technology for its own domestic fishermen. The most preferred outcome for Canada would be for both countries to ban the new technology. The second most preferred outcome for Canada would be if Canada did not ban the technology but Iceland did. The third most preferred outcome for Canada would be if neither country banned the new technology. The least preferred outcome for Canada would be if Canada banned the new technology but Iceland did not. Iceland has the exact same preferences as Canada. Draw a 2x2 game to represent this situation and find the Nash Equilibria. Also make sure that you label the players, actions, and payoffs. Show all of your work.

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Bruce Allen · Answer 1

Iceland

Ban No ban

Canada Ban (10, 10) (-5, 5)

No ban (5, - 5) (1, 1)

The payoff matrix for this game is shown above, Note that when both impose a ban, they both get a payoff of worth $10. But when one of them ban and the other does not, the payoff turns - 5 for the one who does not ban. Finally, when they do not impose a ban, their payoffs are 1. Both countries do not have dominant strategy to ban or no ban as their payoff are different in each scenario. There are two Nash equilibrium for this game, where both the countries impose a ban and where they both do not. The equilibrium are defined as (Ban, Ban), (Not ban, Not ban)