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Unformatted text preview: n West. If both decide
to kill 5 buffalos each per day, then they earn profits of $500 each. If they both decide to kill 1 buffalo
each per day, then they earn profits of $700 each (because the herd is so much more productive).
However, if one decides to kill 1 and the other decides to kill 5, the first earns $200 in profits and the
second earns $1000 in profits.
A) Set up the 4-box diagram for these choices and payoffs.
B) If the settlers behave competitively, what is the equilibrium outcome?
C) Why is the market equilibrium of a common resource ineff...
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- Spring '08
- Environmental Economics