Two farmers have unlimited access to a common plot of land and can let their cows graze on it. The matrix below shows the benefits they get from grazing either 1 or 2+ cows on the land. Farmer 2 Farmer1 1 cow 2+ cows 1 cow 8,8 2,10 2+cows 10,2 4,4 What kind of game is this?What is/are the Nash equilibrium/equilibria?What is/are the Pareto efficient outcome(s) in this game? (Hint: Remember that Pareto efficiency occurs when no one person can be made better off without someone else being made worse off) The government offers a reward or subsidy for communities where farmers only allow 1 cow to graze on the common field, resulting in a new payoff matrix: Farmer 2 1 cow 2+ cowsFarmer 1 1 cow 15,15 2,10 2+cows 10,2 4,4 What kind of game is this?What is/are the Nash equilibrium/equilibria?What is/are the Pareto efficient outcome(s) in this game?Finally,What is the relationship you observe between Pareto efficiency and Nash equilibria? How do these differ across the two games?

Answered: Two farmers have unlimited access to a…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 17P

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Two farmers have unlimited access to a common plot of land and can let their cows graze on it. The matrix below shows the benefits they get from grazing either 1 or 2+ cows on the land.

		Farmer 2
Farmer1		1 cow	2+ cows
	1 cow	8,8	2,10
	2+cows	10,2	4,4

What kind of game is this?
What is/are the Nash equilibrium/equilibria?
What is/are the Pareto efficient outcome(s) in this game? (Hint: Remember that Pareto efficiency occurs when no one person can be made better off without someone else being made worse off)

The government offers a reward or subsidy for communities where farmers only allow 1 cow to graze on the common field, resulting in a new payoff matrix:

		Farmer 2
		1 cow	2+ cows
Farmer 1	1 cow	15,15	2,10
	2+cows	10,2	4,4

What kind of game is this?
What is/are the Nash equilibrium/equilibria?
What is/are the Pareto efficient outcome(s) in this game?

Finally,

What is the relationship you observe between Pareto efficiency and Nash equilibria? How do these differ across the two games?

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