In this lesson, we are going to learn
about a game known as "Tragedy of the

Commons." The story if this game is that
there are two fishermen that are fishing

a pond. They can either choose to fish or
to over fish. Now if the both fish, they

get a pay off of three. And the reason is
that fishing a normal amount is healthy

for the pond, and the pond can regenerate
year after year. However, if they both

over fish, the ecosystem of the pond is
harmed, and future crops, or future fish

production will be down. This will be bad
for the fishermen, so they both earn a

reward of two. If one of the fishermen
fishes, and the other one over fishes,

while the pond is still okay, but the
person that over fished gets a much higher

pay off from the one who just fishes
normally, because, in essence, he steals

all the other players fish. Now, if
you've been paying attention, you'll

notice that this game is exactly the same
as the prisoner's dilemma game, in which

two two, or over fish over fish is the
unique pure strategy Nash equilibrium

What we're gonna see in this lesson, is
how a regulator or government body can

improve the well fare, or improve the
payoffs of the players in equilibrium by

subtracting payoffs. What do I mean by
this? Well, let's do this through an

example. Suppose that there is a two...
you can call it dollar, but I'll just call

it "two unit find" for over fishing.

Okay, so now this payoff matrix changes.

So when they both over fish, okay they get
their payoff of two

but because they have pay the
fine they each get payoffs of zero.

Similarly, when one person fishes and the
other over fishes, the one that over

fishes, gets penalized too. Of course when
they both fish regularly, nobody gets

fined. So we wanna see , can the regulator
can the government body improve the

total utility of the players, by 
subtracting from some of the actions?

Well, to answer that question, all we 
have to ask now, is " Fish Fish" a Nash

equilibrium? So, let's look. Assuming
player one plays fish, and player two

is playing fish, does player two have an
incentive to over fish? Well, no he

doesn't, because if he over fishes, he
gets two instead of three. Yes he caught

more fish, but he had to pay the two
dollar fine to the regulator or the

government. Now consider player one.
Assuming player two's strategy is fixed

at fish, does player one have an
incentive to change his strategy from

fish, to over fish? Well, if he does that,
he again gets two instead of three.

And since he prefers three over two,
player one does not have an incentive

to over fish. Therefore, in the fishing
game, in the tragedy of the commons,

what we see, is that a government
regulator, or a regulating body can come

in and simply fine players for their
actions, reducing their payoffs,

but the equilibrium outcome is an increase
in payoffs for all players.