Figure 8.1 Charla and Mirna are the only two inhabitants of an isolated town in the Arctic Circle. Each uses an old coal-fired heating system to keep their homes warm, but those heating systems generate a great deal of pollution. Installing a pollution-control device on such a system costs $700, but Charla and Mirna would each save $490 apiece on their health care expenses for each device installed. The payoff matrix above shows the possible gains and losses, or incentives, for both Charla and Mirna.
-Refer to Figure 8.1. This situation represents a

Question

Figure 8.1  Charla and Mirna are the only two inhabitants of an isolated town in the Arctic Circle. Each uses an old coal-fired heating system to keep their homes warm, but those heating systems generate a great deal of pollution. Installing a pollution-control device on such a system costs $700, but Charla and Mirna would each save $490 apiece on their health care expenses for each device installed. The payoff matrix above shows the possible gains and losses, or incentives, for both Charla and Mirna.
-Refer to Figure 8.1. This situation represents a

Quizplus · Accepted Answer

The prisoner's dilemma game is characterized by a situation where individual rationality leads to a worse collective outcome, which seems to be implied by the reference to Figure 8.1, even though the figure is not provided.

Figure 81 Charla and Mirna Are the Only Two Inhabitants