Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute
ID: 1111419 • Letter: M
Question
Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisonerâTMs dilemma of the sort studied in a previous chapter. Each state must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. Michigan Protect WI gains 500 WI loses 300 MI gains 500| MI gains 600 Not Protect Protect Wisconsin Not Protect WI gains 600 WI loses 250 MI loses 300 MI loses 250 Based on the table what will the outcome of this game be? Explain.Explanation / Answer
Nash equilibrium is a strategy profile such that for each player given strategy, it is best response. Nash equilibrium is a set of strategies such that each player is doing their best given the strategy of other player.
If Wisconsin chooses to Protect then best response of Michigan is to choose Not Protect because it gives more payoff to MI.
If Michigan chooses to Not Protect then best response of Wisconsin is to choose Not Protect because in this case loss of WI will be less.
So, (Protect; Not Protect) is not the nash equilibrium.
If Wisconsin chooses to Not Protect then best response of Michigan is to choose Not Protect because it gives less loss to MI.
If Michigan chooses to Not Protect then best response of Wisconsin is to choose Not Protect because in this case loss of WI will be less.
So, (Not Protect; Not Protect) is the nash equilibrium.