Analyzing a Failed International Environmental Agreement
Two countries, Oceana and Aquaria, share a valuable fish stock. Both can choose to 'Conserve' (limit their catch) or 'Overfish'. The payoff matrix below represents the annual economic benefit (in millions) to each country. The first number in each pair is the payoff for Oceana, and the second is for Aquaria.
| Aquaria | |||
| Conserve | Overfish | ||
| Oceana | Conserve | (10, 10) | (2, 15) |
| Overfish | (15, 2) | (4, 4) | |
To address the depleting fish stock, the two countries sign an agreement. The agreement stipulates that if both countries are found to be conserving, they will each receive a 'Sustainable Fishing' certification, which increases their economic benefit from that outcome by 2 million each. The agreement includes no other incentives or penalties. Within a year, both countries have reverted to overfishing.
Based on an analysis of the players' incentives, explain why this agreement failed to make mutual conservation a stable outcome.
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