The Dilemma of the Pest Control Game: Individual vs. Collective Rationality

Two neighboring farmers must independently choose between using an inexpensive 'Polluting Method' for pest control or a more expensive 'Clean Method'. The table below shows the profit (payoff) each farmer receives based on their combined choices. The first number in each pair is Farmer 1's payoff, and the second is Farmer 2's.

Based on this payoff structure, both farmers acting in their own self-interest will choose the 'Polluting Method,' leading to the (2, 2) outcome. Which statement best analyzes why this happens, even though the (3, 3) outcome would make both of them better off?

In a classic two-player pest control game, the highest possible individual payoff for a farmer is achieved by using a cheap, polluting pesticide while the other farmer uses an expensive, clean one. The worst individual payoff comes from using the clean pesticide while the other uses the polluting one. Given this structure, if one farmer is guaranteed that the other will use the clean pesticide, their own self-interested best move is to also use the clean pesticide.

Analyzing a Change in Payoffs

Competitive Pricing Dilemma

Two farmers, Anil and Bala, must independently decide whether to use a cheap but polluting pesticide ('Terminator') or an expensive but environmentally-friendly method ('IPC'). The table below shows the profits (payoffs) for each farmer based on their choices. The first number in each cell is Anil's payoff, and the second is Bala's. Match each concept to its correct representation in this game.

Explaining the Dilemma in the Pest Control Game

Analyzing Incentives in the Pest Control Game

In a standard pest control game, the outcome where both farmers independently choose to use a polluting pesticide is the dominant strategy equilibrium. This outcome is described as ________ because an alternative outcome exists (both using a clean method) where both farmers would be better off.

Two farmers, Anil and Bala, must independently decide whether to use a cheap but polluting pesticide ('Terminator') or an expensive but environmentally-friendly method ('IPC'). The table below shows the profits (payoffs) for each farmer based on their choices. The first number in each cell is Anil's payoff, and the second is Bala's.

Arrange the following steps in the logical order that Anil would follow to determine his best strategy in this game.

Two farmers must independently choose between using an inexpensive 'Polluting Method' for pest control or a more expensive 'Clean Method'. The table below shows the profit (payoff) each farmer receives based on their combined choices. The first number in each pair is Farmer 1's payoff, and the second is Farmer 2's.

Now, suppose a new government program offers a subsidy of 2 units to any farmer who chooses the 'Clean Method'. How does this subsidy alter the outcome of the game?