The payoff matrix shows outcomes of various strategies that…
The payoff matrix shows outcomes of various strategies that a home and foreign country can follow to decide to regulate or not regulate pollution. The columns give Foreign’s actions, and the rows give Home’s actions. The values in the upper right-hand corner of each element give Foreign’s net benefits; the values in the lower left-hand corner of each element give Home’s net benefits. Net benefits are the environmental benefits from regulation minus the costs associated with installing pollution control equipment. What is likely to happen if there are no international agreements to limit pollution?