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. If each player cooperated with one another, each player would find themselves ________ better off than they are by playing their dominant strategies.

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. If each player cooperated with one another, each player would find themselves ________ better off than they are by playing their dominant strategies.

Quizplus · Accepted Answer

When players cooperate instead of playing their dominant strategies in a game theory context, they can often achieve a more optimal outcome for both, which is typically better than the outcome they would achieve by individually pursuing their own interests without cooperation. The specific amount ($280) would be derived from the details of the payoff matrix in Figure 8.1, which isn't provided here, but the principle applies broadly in game theory, particularly in scenarios resembling the Prisoner's Dilemma, where mutual cooperation yields better outcomes than mutual defection.

Figure 81 Charla and Mirna Are the Only Two Inhabitants