Summary 489vis-à-vis the status quo). In both tables, emissions are measured in
billions of tons per year.
a. Is global warming a kind of prisoner’s dilemma? Is it in the self-
interest of any of the blocs to reduce emissions unilaterally? Explain
briefly.
b. In preliminary talks, Europe has sought an agreement calling for
“shared sacrifices’’—that is, multilateral emission reductions.
However, because of large budget deficits, neither the United States
nor Europe is prepared to extend monetary aid to the developing
world in compensation for its reductions. Does there exist a
multilateral reduction plan that benefits all blocs?
c. Suppose, instead, that financial payments between blocs are
feasible. Identify the efficient, global reduction plan. How much
reduction should each bloc undertake, and what sort of
compensation is necessary? (Hint:Any incremental emission
reduction should be undertaken as long as the additionalglobal
benefit exceeds the extracost.)- Real World Enterprises (RWE) provides a variety of “backroom” business
services to other companies. It operates eight different facilities that
employ large numbers of workers undertaking clerical tasks. The firm
has become aware that a significant number of its workers suffer from
hand and wrist injuries associated with repetitive motion on the job.
These injuries result in productivity losses, increased health care costs
(RWE provides generous health benefits to its employees), and reduced
employee morale.
RWE has undertaken a study of the extent of the problem. The study
finds that the firm would incur a cost of about $150,000 per facility to
create a health and safety program directed at this problem. The study
also notes that the problem is much greater at some facilities (because of
differing clerical tasks) than at others. The following table estimates the
relation between total benefitsto RWE and the number of facilities
participating in the safety program:
TABLE B
Benefits from Emission
Reductions ($ Billions
per Year)Total United Total United
Emissions States Europe DNs Emissions States Europe DNs
3.6 0 0 0 2.6 28 40 46
3.4 6 8 10 2.4 32 45 54
3.2 12 16 20 2.2 36 50 60
3.0 18 24 30 2.0 40 55 66
2.8 24 32 38 1.8 44 60 72c11RegulationPublicGoodsandBenefitCostAnalysis.qxd 9/29/11 1:34 PM Page 489