The third climate game model presented in Figure 4.23c is defined by a specific payoff structure. For each individual country, the best possible outcome is to continue with 'Business as Usual' (BAU) while the other country adopts the 'Restrict' strategy. Conversely, the worst outcome for both nations is mutual persistence in BAU, which poses a significant risk of extinction for humans and other species. The only path to substantially moderate climate change in this model is for both countries to choose the 'Restrict' strategy.

Payoff Structure of the Third Climate Game Model (Figure 4.23c)

The third climate game model, detailed in Figure 4.23c, is classified as a hawk-dove game, representing a strategic situation distinct from a prisoners' dilemma or a pure coordination game. This model is defined by two key features: a shared incentive among countries to avoid a mutually catastrophic outcome (both playing 'Hawk'), and a significant conflict of interest where each country strongly prefers for the other to bear the costs of emission reductions (playing 'Dove'). This preference creates a scenario where each nation would rather play 'Hawk' (BAU) while the other plays 'Dove' (Restrict).

Classification of the Third Climate Game as a Hawk-Dove Game

The third climate game model is classified as a coordination game that features two stable equilibria and a conflict of interest, meaning the players have opposing preferences over which of the two outcomes to choose.

Classification of the Third Climate Game as a Coordination Game with a Conflict of Interest

The third climate policy model is a type of coordination game that features two equilibria. Similar to the programming language game between Astrid and Bettina, this model is characterized by a conflict of interest, as the players have opposing preferences regarding which of the two stable outcomes to choose.

Figure 4.23c illustrates a third model of the climate change game, which is characterized by a conflict of interest. The diagram shows the best responses for each player and provides hypothetical numerical payoffs that represent the value of each outcome for the citizens of each country.

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Figure 4.23b is a diagram that presents two distinct versions of the climate policy game, each based on a different set of hypothetical payoffs.

Figure 4.23b: Two Different Climate Policy Games

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

The climate policy game depicted on the left in Figure 4.23b is an example of a prisoners' dilemma. In this scenario, 'Business as Usual' (BAU) serves as the dominant strategy for both countries. Consequently, the rational pursuit of self-interest by both parties leads to an undesirable (BAU, BAU) outcome, which is classified as 'Bad' for both.

Analysis of the Left-Hand Climate Policy Game as a Prisoners' Dilemma

The right-hand game in Figure 4.23b is a coordination game with two Nash equilibria: a 'Best' outcome where both countries restrict emissions, and a 'Bad' outcome where both continue with Business as Usual (BAU). This game is analogous to the rice-cassava specialization game, but with a key difference: here, players benefit from choosing the same strategy, whereas in the rice-cassava game, they benefited from choosing opposite strategies.

Analysis of the Right-Hand Climate Policy Game as a Coordination Game

In both climate policy game scenarios—the prisoners' dilemma and the coordination game—negotiation provides a mechanism to potentially improve upon the equilibrium outcome and achieve a more mutually beneficial result.

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