Reference no: EM133083143

The purpose of the Paris agreement was to set a coordination mechanism between countries and limit carbon emissions at a global level. In this period of climate emergency, high carbon emissions and the non respect of Paris agreement by numerous countries, have been criticized in the newspapers and described as dangerous for future generations. From a game theory perspective, respecting or not the Paris agreement can be modeled as a strategic game. Let's assume that we have two countries who can choose between option 1: not respecting and exiting the Paris agreement (increase their carbon emission); and option 2: respecting the Paris agreement (limit their carbon emission).  The following matrix gives the payoffs of each choice, where in each cell, the first number is the payoff of country A and the second number is the payoff of country B.

1. Explain the strategic interactions in this game
2. Find the equilibrium by elimination of dominated strategies
3. Does individual rationality lead to a socially desirable outcome? Why?