Question

Consider the case of global environmental problems that spill across international borders as a prisoner’s dilemma of the sort studied in; . Say that there are two countries, A and B. Each country can choose whether to protect the environment, at a cost of 10, or not to protect it, at a cost of zero. If one country decides to protect the environment, there is a benefit of 16, but the benefit is divided equally between the two countries. If both countries decide to protect the environment, there is a benefit of 32, which is divided equally between the two countries.

a. Country A should protect the environment as it has a costlier impact.

b. Country B should protect the environment as it benefits more from environmental protection.

c. Both countries should protect the environment to maximize the collective benefit.

d. None of the countries should protect the environment as the costs outweigh the benefits.

Answer 1

Countries A and B face a prisoner's dilemma regarding environmental protection (option b), leading to a likely outcome of neither country acting to protect the environment without an international agreement. Maximizing individual payoffs results in a suboptimal collective outcome, as countries are incentivized to free-ride on each other's efforts. Environmental treaties can mediate this issue and promote mutual environmental protection.

Step-by-step explanation:

When considering a prisoner's dilemma situation involving two countries, A and B, making decisions about environmental protection, we can analyze the costs and benefits to understand their likely actions without an international agreement. With each country facing a cost of 10 to protect the environment and splitting the benefits equally, the outcomes vary depending on whether one or both countries choose to protect the environment or not.

If Country A protects and Country B does not, Country A incurs a cost of 10 but gets half of the benefits (8), resulting in a net payoff of -2. Conversely, Country B pays nothing and also gets half the benefits, resulting in a payoff of 8. Therefore, Country B has an incentive not to protect the environment if A is protecting it. The roles and payoffs are symmetrical if B protects and A does not.

If both countries protect the environment, each pays 10 and gets half of 32 in benefits, which results in a payoff of 6 each. This is a higher collective benefit compared to only one country acting, but individually, each country is incentivized to free-ride on the other's environmental protection efforts. When both countries protect, the collective benefit is maximized, but individual rationality leads each country to not protect in an attempt to maximize their payoff. This dilemma can be resolved through environmental treaties where countries come to an agreement to share the costs and benefits more equitably and ensure mutual environmental protection.