Scenario 13.9 Consider the Following Game

question 111

Multiple Choice

Scenario 13.9
Consider the following game:
Two firms are situated next to a lake, and it costs each firm $1,500 per period to use filters that avoid polluting the lake. However, each firm must use the lake's water in production, so it is also costly to have a polluted lake. The cost to each firm of dealing with water from a polluted lake is $1,000 times the number of polluting firms.
-Refer to Scenario 13.9. If this game is repeated over an infinite or uncertain horizon, the most likely observed behavior will be that:

• A) both firms pollute.
• B) only Lago pollutes.
• C) only Nessie pollutes.
• D) neither firm pollutes.
• E) the firms alternate polluting in different periods.