Question
The Australian government has to decide whether to meet the international target for CO2 emissions. Australia's trade partner, New Zealand, has to subsequently decide whether
The Australian government has to decide whether to meet the international target for CO2 emissions. Australia's trade partner, New Zealand, has to subsequently decide whether to impose trade sanctions on Australia in reaction to Australia's decision. The decision tree below shows the options and the payoffs in billions of dollars of trade for the two countries (the negative sign indicates a loss). Assuming the governments of both countries are rational and self-interested, Australia will ignore the target and New Zealand will not impose any sanctions - but why?
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