Consider the following payoff matrix for two firms. A chemical firm must choose between a

low level of production which yields one ton of pollution into a nearby lake and a high level of

production which yields two tons of pollution into the nearby lake. A private beach on the lake must decide whether to operate or not. Increased pollution reduces the number of people who wish to visit the beach.

Payoff Matrix Chemical Firm 1 Ton Pollution 2 Tons Pollution 15 20 Shut Down 0 Beach 15 20 Operate 25 15