The Game Called Climate

International cooperation on climate change is an example of game theory with a Nash equilibrium and a dominant strategy. Let’s look at the problem from a country’s viewpoint and construct the payoff matrix. We call it the country MY.

The premise is that the climate crisis is real, but the solution is costly because it requires developing new technologies. If neither the country MY nor the rest makes any attempt to invest, the game ends in total calamity: {(MY:-10), (RE:-10)}. On the other hand, if country MY remains a passive free-rider and the rest of the world does the job, the former gets the maximum benefit (MY:12). On the other hand, if country MY makes all the effort, the payoff will be (MY:-15) in great losses for them. Finally, if everybody cooperates according to their respective capacities, all of them will benefit {(MY:10),(RE:10)}. The payoff matrix is

Country MY calculates that it is better placed by not acting, irrespective of what the rest does. They also anticipate that, in such a scenario, the rest will lose more by not working. From an individual country standpoint, this logic of not participating makes it economically advantageous.

But there is an error in this thinking. Any (or all) of the countries in the rest can also follow Country MY’s suit. It leads to a total failure, and no one benefits {-10, -10}