Question

Question Two 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.

Answer 1

Game Theory Canada, ATO for let's assume that bayolds are as fallows When caraceta both countries ban the new technology = 4 when Canada did not ban, but Iceland did, then = 3 canada get a pay off when niether country ban the new technology = 2 When canada banned the new techology, but I Iceland cuid not, Canada get Similarly for Iceland When both countries ban Payoff of Iceland / 3 when Iceland did not, but Canada did 2 when both did not ban 1, when I celand banned, but canada did not Here, Two Players Actions are are & Iceland, and Canada Bann , did not ban. Player 2 : Iceland Ban Player 1 Canada I Ban (4,4 Did not [3, 1 did not ban 3,3 2,2

To find out the hash equilibrium, let's suppose Canada Choose to ban the technology, Given that canada is banning, the best option Iceland have is to ban the technology and get a pay off (4,4). Similarly, when Iceland choose the ban , the best strategy for Canada is to ban the technology as well. Hence, (ban, ban) = (4.4) is a Nash Equilibrium, both players have no incentive to devtate. Case 2 : When Canada choose not to ban the technology Chiven that canada is not banring, the best option Iceland have is to not to ban as well, and get a payoff of (271). Similarly, Civen that Iceland choose not to ban, the best option that Canada have is not be to ban the hochnology. Hence (did not ban, did not ban) is another Nash Equilibrium of this game that offers both the players, a payoff of (212)