.If this is a one-shot game (i.e., it is played once), do the players have a dominant strategy? If so, what is it? Briefly explain your answer. 2.What is the equilibrium of this game? Is it Pareto-optimal? How do you know?
The US and Canada have overfished North Atlantic cod stocks nearly to the point of extinction. Both countries wish to preserve the cod industry (and hence the cod stocks), so the two countries sign an agreement to limit fish hauls. Each country has two possible strategies: comply with the agreement (limit fishing) or renege on the agreement (overfish). Each country’s payoffs for different strategy combinations are given in the matrix below. The numbers in the cells represent utilities, and the payoff ordering is (US, Canada).
QUESTIONS:
1.If this is a one-shot game (i.e., it is played once), do the players have a dominant strategy? If so, what is it? Briefly explain your answer.
2.What is the equilibrium of this game? Is it Pareto-optimal? How do you know?
Pareto efficiency, also known as Pareto optimality, is an economic situation in which resources cannot be redistributed to benefit one individual without harming at least one other. Pareto efficiency suggests that resources are allocated in the most cost-effective way possible, but it does not imply equality or justice. When no economic adjustments can make one person better off without making at least one other person worse off, the economy is considered to be in a Pareto optimal condition. The concept of Pareto efficiency, named after the Italian economist and political scientist Vilfredo Pareto, is a key tenet of welfare economics.
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