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Smoking and Climate Change Essay
Smoking and Climate Change Essay
the feasible strategies, the information and the payoffs. It shows the predicted
outcome or the best response that includes the highest payoff. Game theory can
prove to be an essential tool to analyse why people are increasingly reluctant to
smoke, in the UK.
Below are two persons whom we shall call person A and person B. They take
decisions about whether or not are they going to smoke, given the action taken
by the other person. We shall also introduce some concepts like private benefit
and private cost to cigarette smoking.
Private benefit refers to the benefits that are directly accrued to the individual
who is undertaking an economic activity, while private cost refers to the cost
faced by the decision makers who are directly involved in the consumption of the
good. In this context, we can argue that the private benefit is in terms of the
relaxation that the smoker receives when he smokes a cigarette while his private
cost includes the price he has to pay for a cigarette.
Assume that both person A and person B get a net benefit of 10 if they smoke
(private benefit-private cost) and if one of them does not smoke but the other
person does smoke, the the initial person bears an external cost of 10.
Person A
Smokes
Nash equilibrium,
but not a socially
desirable outcome
Smo
ke
Person B
Does
not
smoke
10
10
Does
10
not
smok
-10
e
-10
10
0
0
New
equilibrium
when each one
takes into
consideration
external costs
This means that smoke is the dominant strategy and, because smoke is the
dominant strategy for both, both smoking is the dominant strategy equilibrium.
The prediction of the game is that both will smoke. Both would be better off had
they both not smoked. So the predicted outcome is not the best that is feasible.
However this has been changing in past years. Though, A and B are not at their
best feasible outcome now, they can get to it they take into consideration the
three following factors:
1. If smokers start internalising the external costs of smoking, that is, they
incorporate the external costs of smoking in their decision, then net
benefit would fall drastically, thus resulting in a fall in number of smokers.
2. Institutions and legislations can ban public smoking thus reducing the
number of smoking.
3. People can reach on agreements where they can simply agree upon not
smoking.
If person A cared about person B, that is, had A incorporated the external
cost of smoking imposed on B, then person A would lower his consumption
of cigarette. Person A is willing to bear the external cost in order to help
person B. This means that person A has altruistic preferences. If person A
had incorporated his external cost (-10), then his net benefit from
cigarette smoking would be zero, which means he is less likely to smoke.
Upon seeing this, person B would be encouraged to reduce his
consumption of cigarette (repeated games) such that they would reach a
new Nash equilibrium which is (0, 0), which is a more desirable outcome.
Conclusively, it can be said that the game theory (actions taken by others)
does influence our decision to smoke. As long as people continue to have
altruistic preferences and as long as laws are correctly enforced to punish
trespassers, the willingness to smoke will continue to fall to reach a
socially desirable outcome.
Climate change is one of the biggest humanitarian crisis of our times and
it demands an international cooperation to reduce its impact, if not
eradicate it. Again, in this context, game theory can be used to assess
whether are there enough reasons for countries to cooperate and abate or
continue to pollute.
Equilibrium
when treaty is
adopted and
followed
Equilibrium
by
self-interested
countries
From the table above, we can see that when both countries abate, they
both benefit from (6,6). The total payoff when both countries abate is 12.
This can also be shown in the above diagram where the country R always
benefits when it does not contribute. Hence the future of our planet seems
bleak in response to climate change.
But luckily enough, countries have started to realise the destruction that
climate change is causing. Treaties, like the Kyoto and Montreal protocols,
are being signed and agreed upon which is leading to the socially
desirable Nash equilibrium (6,6) as shown in the above diagram.
The prospects for cooperation to reduce the impact of climate change are
here. Countries just need to be willing enough to enforce them.