Consider a strategic interaction between two farmers, Anil and Bala, who must each independently decide whether to use an organic pest control method (IPC) or a chemical one (Terminator). The table below shows Anil's payoffs for each of the four possible outcomes. Anil's preferences for these outcomes can be represented by a standard set of indifference curves, where higher curves indicate greater preference. His most preferred outcome is (Anil: Terminator, Bala: IPC), which gives him a payoff of 4.
| Bala chooses IPC | Bala chooses Terminator | |
|---|---|---|
| Anil chooses IPC | Anil's payoff: 3 | Anil's payoff: 1 |
| Anil chooses Terminator | Anil's payoff: 4 | Anil's payoff: 2 |
Why can Anil not simply use his indifference curves to select his most preferred outcome (payoff of 4) and finalize his decision?
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Figure 4.12 - Anil's Self-Interested Preferences and Allocations
Feasibility of Allocations in a Game is Contingent on Opponent's Choices
Consider a strategic interaction between two farmers, Anil and Bala, who must each independently decide whether to use an organic pest control method (IPC) or a chemical one (Terminator). The table below shows Anil's payoffs for each of the four possible outcomes. Anil's preferences for these outcomes can be represented by a standard set of indifference curves, where higher curves indicate greater preference. His most preferred outcome is (Anil: Terminator, Bala: IPC), which gives him a payoff of 4.
Bala chooses IPC Bala chooses Terminator Anil chooses IPC Anil's payoff: 3 Anil's payoff: 1 Anil chooses Terminator Anil's payoff: 4 Anil's payoff: 2 Why can Anil not simply use his indifference curves to select his most preferred outcome (payoff of 4) and finalize his decision?
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