Question
Three firms use water from a lake. Each firm has two possible actions: treat sewage (T) or dump sewage (D). If no one or only
Three firms use water from a lake. Each firm has two possible actions: treat sewage (T) or dump sewage (D). If no one or only one (1) firm dumps sewage, the lake remains clean. if two or more firms dump sewage, the lake becomes polluted. each firm gets a revenue of 4 if the lake is clean and a revenue of 1 if the lake is polluted. The cost of treating sewage is 1. There is no cost to dumping sewage. Each firms payoff is given by its revenue minus sewage treatment cost, if any.
a) Describe the situation as a normal form game using payoff matrixes.
b) is there a (strongly or weakly) dominated action for each player? if yes, which one? if no, explain why
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started