Once the state environmental protection agency devises its new policy to protect the environment, firms decide whether to remain in the state or move their operations to a neighboring state. In the language of game theory, this is an example of:
A) a cooperative game.
B) a sequential game.
C) a threat.
D) the Prisoners' Dilemma.

Question

Quizplus · Accepted Answer

This is a sequential game because the actions of the state (creating the policy) determine the responses of the firms (whether to stay or move). A cooperative game would involve the state and firms working together towards a mutually beneficial outcome, which doesn't seem to be the case here. A threat would imply that there is some sort of coercion or intimidation involved, which isn't specified in the scenario. The Prisoners' Dilemma involves two parties each making a decision based on their own self-interest, which doesn't quite fit this scenario either.

Once the State Environmental Protection Agency Devises Its New Policy