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We can model the problem of climate change as a game between two groups: developing nations and developed nations. In this game, each group can
We can model the problem of climate change as a game between two groups: developing nations and developed nations. In this game, each group can choose from one of two possible climate strategies: . Abate: governments enact policies to reduce carbon emissions, for example, by subsidising clean energies or taxing fossil fuels. No change: governments fail to enact policies to reduce carbon emissions. Businesses and individuals are free to pursue their own self-interest. The outcomes and payoffs of this game are shown in Figure 1 below. Figure 1: Outcomes and payoffs for the climate strategy game. Developed Developed Abate No Change Abate No Change Emissions Developed countries free ride on Good Best reductions that Abate successfully developing Abate moderates climate countries emissions change reductions Good Worst Developing Developing Developing countries free Worst Bad ride on developed No emissions No Change No Change countries reductions emissions Best Bad reductions Question 1 What is the Nash equilibrium of the game shown in Figure 1? Show the steps you took to reach this conclusion. Is this Nash equilibrium a prisoners' dilemma? Why or why not? [2
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