Part 1

Read the following key article 1: https://qz.com/2099301/game-theory-says-the-paris-agreement-might-be-a-climate-winner/.

Game theory tasks for Part 1 are as follows:

You are to construct a relevant payoff matrix (in numbers only) based on key article 1.

To help you construct the payoff matrix, here are the key parameters and assumptions:

• There are two players - 'Player 1' is the US, and 'Player 2' is other countries.
• There are two strategies - 'decarbonise' (DC) or 'nearly business-as-usual' (NBAU). oEach strategy has an associated payoff.
• Assume this climate change game is played over the next couple of years and is framed from the viewpoint of an optimistic game theorist.

Think of this as a simultaneously played game: this is a game played once and is repeated more than once, yet the rules, players, and payoffs are the same each time.

In this game, you will need to work out what the associated numerical (hypothetical) payoffs are. Explain in words each quadrant and any specific outcome you come across. In your analysis, discuss the role of preferences and social norms amongst the players and how this affects the allocation. (600 words)