Simplicity assume each country have only two strategies

Assignment Help Microeconomics

Reference no: EM13253002

Assume two countries, West and East, want to decide whether to abate (control) their pollution or not. For simplicity assume each country have only two strategies, abate or do not abate.

The cost of abatement for these countries is given by
CE = 5 + aE + aE2
CW = 2+aW +0.5 aW2
Where aE and aW present the abatement effort by country East and West respectively. If they put some effort on abatement, the quality of environment will improve for both countries. Assume the environmental benefits of abatement for each country is
BE = 15 (aE + aW)
BW = 25 (aE + aW)
If both countries do nothing (no abatement) the estimated environmental damage for East is $5 billion and for West is $2 billion.
a. Construct the normal form (table) game.
b. Under which condition (abate, abate) is the unique Nash equilibrium for this game?
c. find the abatement levels or (aE and aW) for both countries which satisfy the conditions you find in part b.
Notes:aE and aW could be either 0 or any other amount which you may call it simply aE and aW.

So, e.g., if country E doesn't abate aE=0, if it does it's abatement level is aE (which could be any positive number and then in the third part you will find a range of values which satisfies condition b). As a result, for cases that a country is abating, the net payoff will be a function of aE and/or aW.

Reference no: EM13253002

Questions Cloud

What is the power of the implanted lens : An artificial lens is implanted in a person's eye to replace a diseased lens. The distance between the artificial lens and the retina is 2.70 cm. What is the power of the implanted lens

What is the restriction on enable control input lines : What is the function of the enable control input of a tri-state buffer If the output of two or more tri-state buffers is connected to each other, what is the restriction on enable control input lines

Calculate the rate of interstellar extinction : A certain red giant star has a luminosity of 100,000 times that of the Sun and is located 600 light-years from Earth. calculate the rate of interstellar extinction in the direction of the star

Explain elements with an atomic number : Which elements with an atomic number greater then 40 can be expected to have chemical properties similar to those of the element Br and what is the periodicity of the two

Simplicity assume each country have only two strategies : Assume two countries, West and East, want to decide whether to abate (control) their pollution or not. For simplicity assume each country have only two strategies, abate or do not abate.

Determine the resistance of a lightbulb : What is the resistance of a lightbulb that uses an average power of 40.0 W when connected to a 60.0-Hz power source having a maximum voltage of 132 V

What is the role of the vision and mission statement : What is the role of the vision and mission statement in driving the activities of the firm? If there is no vision and/or mission statement, discuss possible reasons why it is not clear.

Determine the voltage profile in the device : A p-n junction is made by doping Silicon with donors and acceptors. The doping at the p side has a uniform density of NA, but the doping density at the n side is not uniform and changes linearly with the distance from the metallurigical junction.

Explain the changes in environment and in the industry : Explain the changes in environment and in the industry's or company's evolving strategy.

User Account

All Pages