Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. In the absence of any agreement, the outcome of this game will be

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Given the costs and benefits for each state, neither state has an incentive to clean the lake on their own if they bear all the costs but do not receive all the benefits. However, Illinois has a net benefit (benefits - costs = 900 - 700 = 200) from cleaning the lake that is higher than the net loss Wisconsin would incur if it cleaned the lake (benefits - costs = 1100 - 1200 = -100). Therefore, without an agreement to share costs and benefits, Illinois is more likely to clean the lake because it still gains more than it loses, unlike Wisconsin.

Both Wisconsin and Illinois Border Lake Michigan