Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 3

Two neighbors share a pond they have stocked with catfish. They have agreed upon the amount of fishing each can do in order for the stock of catfish to replenish itself. If one neighbor increases the amount he fishes a little bit, the catfish stock could still replenish itself. If both neighbors increase their fishing, the stock will not be sustainable. Both neighbors would like to cheat and increase the amount they fish, but want the other neighbor to stick to the agreement.
a. What is the noncooperative outcome, and why does it occur? b. What is the cooperative outcome, and how could the neighbors achieve this outcome?