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 Prisoner's dilemma.

Question

Quizplus · Accepted Answer

This scenario represents a sequential game as the actions of one player (the state environmental protection agency) will influence the decisions of the other player (firms) in the game. The state agency is the first mover, and the firms are the second movers. They will make their decision based on the action taken by the state agency. The other options are not appropriate as there is no mention of cooperation, threats, or the Prisoner's dilemma in this scenario.

Once the State Environmental Protection Agency Devises Its New Policy