Refer to following variations of the payoff matrix for the environmental game shown in Figure 11-7. In this problem, a number is assigned to represent the welfare level of each outcome for Home and Foreign.

a. First, consider the case of global pollution in which the government puts more weight on producer profits than consumer wellbeing when calculating welfare (this is so since a portion of consumer costs are borne by the other country). How can you tell that the government favors producers over consumers from the following payoff matrix? What is the Nash equilibrium for this environmental game? Is it a prisoner’s dilemma? Briefly explain. 50 80 Regulate Don’t regulate 80 Regulate Home Foreign Don’t regulate 50 100 70 70 100

b. Next, consider the case of local pollution in which the government puts more weight on consumer well-being than producer profits when calculating welfare. How can you tell that the government favors consumers over producers from the following payoff matrix? What is the Nash equilibrium for this environmental game? Is it a prisoner’s dilemma? Briefly explain. 70 70 Regulate Don’t regulate 70 Regulate Home Foreign Don’t regulate 70 50 50 50 50 Longer study questions: The following questions ask you to consider a real-life situation involving international trade agreements, dealing with trade, labor, or the environment. For each question, you are asked to develop an “agree” or “disagree” position on each situation. These situations are drawn from recent press reports, which are available in the instructor’s manual. You can research the issues on the Web and also rely on any relevant information from this textbook. Your instructor might ask you to answer these questions individually, in pairs, or in groups for presentation in class.