b. Two farmers, Anil and Bala, are each deciding how to deal with pest insects that destroy the crops they cultivate in their adjacent fields. They have the choice of using either Integrated Pest Control (IPC) or Terminator (T). The payoffs for their choices, in terms of tonnes of crop, are as follows: Bala's payoff 5 4 3 2 1 0 0 I, T 1 T, T: 1,1 2 3 Anil's payoff 4 T, I 5 Outcomes better for both than I, I Outcomes better for both than T, T Outcomes better for both than T, I Outcomes better for both than I, T I, I = Both use Integrated Pest Control (IPC) T, T = Both use Terminator T, I = Anil uses Terminator, Bala uses IPC I, T = Anil uses IPC, Bala uses Terminator i. Define what is meant by a 'Pareto efficient outcome. Which of the four outcomes shown above are Pareto efficient? ii. Will Anil and Bala both be happy to move from the Pareto efficient (I, T) to the "fairer" Pareto efficient outcome (I, I)? What does your answer to this question tell us about the link between equity and Pareto efficiency?

b. Two farmers, Anil and Bala, are each deciding how to deal with pest insects that destroy the crops they cultivate in their adjacent fields. They have the choice of using either Integrated Pest Control (IPC) or Terminator (T). The payoffs for their choices, in terms of tonnes of crop, are as follows: Bala's payoff 5 4 3 2 1 0 0 I, T 1 T, T: 1,1 2 3 Anil's payoff 4 T, I 5 Outcomes better for both than I, I Outcomes better for both than T, T Outcomes better for both than T, I Outcomes better for both than I, T I, I = Both use Integrated Pest Control (IPC) T, T = Both use Terminator T, I = Anil uses Terminator, Bala uses IPC I, T = Anil uses IPC, Bala uses Terminator i. Define what is meant by a 'Pareto efficient outcome. Which of the four outcomes shown above are Pareto efficient? ii. Will Anil and Bala both be happy to move from the Pareto efficient (I, T) to the "fairer" Pareto efficient outcome (I, I)? What does your answer to this question tell us about the link between equity and Pareto efficiency?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the following payoff matrix, how many Nash equilibria are there?
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