Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms.
-What is true about dominant strategies in the game in Scenario 13.9?
A) "Pollute" is a dominant strategy for both firms.
B) "Pollute" is a dominant strategy for Lago only.
C) "Don't Pollute" is a dominant strategy for both firms.
D) "Don't Pollute" is a dominant strategy for Lago only.
E) There are no dominant strategies.

Question

Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms. 
-What is true about dominant strategies in the game in Scenario 13.9?
A) "Pollute" is a dominant strategy for both firms. 
B) "Pollute" is a dominant strategy for Lago only. 
C) "Don't Pollute" is a dominant strategy for both firms. 
D) "Don't Pollute" is a dominant strategy for Lago only. 
E) There are no dominant strategies.

Quizplus · Accepted Answer

In Scenario 13.9, "Pollute" being a dominant strategy for both firms means that regardless of the other firm's action, each firm benefits more from choosing to pollute. This is characteristic of many environmental dilemmas where individual incentives lead to collectively suboptimal outcomes.

Scenario 13.9 Consider the Following Game