In this lecture, we continue our discussion of an economic analysis of Collective Action Problems related to sustainability. We start with a conventional market-based analysis of an open-access resource (such as an open-access fishery). After demonstrating that the real question is less about how much individuals consume but more about which individuals choose to take part in consumption, we pivot to a basic introduction to game theory. This involves the Prisoner's Dilemma (as a general framework for thinking about Collective Action Problems) and then the Hawk-Dove Game (or Game of Chicken) as a case better suited to model open-access problems like the fishery (or highways at rush hour). We describe briefly that the stag hunt could be used to model public goods games with strong positive externalities (stronger than the positive externalities with the Prisoner's Dilemma), but we stop our detailed discussion after the anti-coordination games.
Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/nsfdzd70pqdv742/LectureC8-2020-10-15-Mkt_Failures_in_Env_Realm_P3-CAP_and_Game_Thy.pdf?dl=0
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