The Farmers' Grazing Dilemma
Two farmers share a common pasture for their sheep. Each farmer can choose to either limit their flock size or expand it. If both limit their flocks, the pasture remains healthy, and both earn a moderate profit. If one expands while the other limits, the expander earns a very high profit by overgrazing, while the other's sheep suffer, leading to a loss. If both expand, the pasture is ruined, and both earn a very low profit. Explain why, without an enforceable agreement, both farmers are likely to expand their flocks, and how a binding agreement could lead to a better outcome for both.
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Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
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