Refer to following variations of the payoff matrix for the environmental game shown in Figure 11-7. In this problem, a number is assigned to represent the welfare level of each outcome for Home and Foreign.
a. First, consider the case of global pollution, in which the government puts more weight on producer profits than consumer well-being when calculating welfare (this is so since a portion of consumer costs are borne by the other country). How can you tell that the government favors producers over consumers from the following payoff matrix? What is the Nash equilibrium for this environmental game? Is it a prisoner's dilemma? Briefly explain.

b. Next, consider the case of local pollution in which the government puts more weight on consumer well-being than producer profits when calculating welfare. How can you tell that the government favors consumers over producers from the following payoff matrix? What is the Nash equilibrium for this environmental game? Is it a prisoner's dilemma? Briefly explain.

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Foreign Regulate Don't regulate 80 100 Reguate 80 50 Home 50 70 Don't regulate 100 70 Foreign Regulate Don't regulate 70 50 Regulate 70 70 Home 70 50 Don't regulate 50 50