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Social dilemma: Consider a strategic interaction, in which the US and the EU have the choice to Restrict their greenhouse gas emissions or continue with
Social dilemma: Consider a strategic interaction, in which the US and the EU have the choice to Restrict their greenhouse gas emissions or continue with Business-As-Usual (BAU). The players' payoffs (measured in thousands of dollars per capita) for the four possible outcomes are listed in the table below. For any outcome, the US receives the payoff to the left of the comma, and the EU receives the payoff to the right of the comma. Assume both players act in their self-interest.
Highlight all Nash equilibria. Why are they equilibria?
EU | |||
Restrict | BAU | ||
US | Restrict | 60, 60 | 20, 70 |
BAU | 70, 20 | 30, 30 |
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