Question

please check if my answering approach is correct

1. Suppose that there is a rural community with a lake, where everyone’s economic activity is fishing. Everyone in that community has more or less the same fishing equipment (boats, rods, etc.), the same fishing skills (knowledge about fishing), and the same luck catching the fish. All of the individual’s well-being depends on the quantity of fish they catch from the lake and then sell on the city. The price at which the fish is sold is not controlled by the fishermen, but rather determined by the market. In this context, the only way in which a single fisherman could out-compete another fisherman would be by fishing for longer hours and catching a larger quantity of fish. If the incentive for an individual fisherman is to fish larger quantities, then at some point the rate of reproduction of the fish is smaller than the rate of fishing, potentially depleting them.

1. Explain the problem with the incentive to out-compete other fishermen by continuing to fish more and more.

The problem with the incentive to out-compete other the fishermen by continuing to fish more and more is to overfish and run the fish population down and out. That could be a big problem for a rural community with one economic activity.

2. What evidence could indicate the problem you observed in 1?

The fisherman can only compete with other fishermen is to fish for long hours and catch a large quantity of fish. There is no factor in Quality and Price control involved.

3. Indicate the reasoning behind this problem. Why did it happen? What context could have led fishermen to try to follow this incentive?

The reasoning behind this problem is that there is a competition based on quantity with the fisherman have same skills, equipment, and luck. The price is controlled by the market. The only way to increase the revenue is by selling a greater number of fishes meaning working long hours. If the price is set on weight instead of quantity or even quality that could give them incentive to not overfish.

4. Indicate the possible solution for the problem listed on 1. What could you suggest? What is your solution, based on a reasonable argument?  

            The possible solution for this problem is to assign days to fisherman to go for fishing and other days then can-do farming, This  Solution is more feasible because it provides another source of income to each individual.

C.        What are the implications and outcomes of your argument? Did you choose the right argument? If yes/no why?

   My solution is good because each fisherman can have another source of income may be some plant fruit farms some plan vegetables. Their economic condition might get improved and not totally depend on fishing. In the event of bad weather or unfortunate circumstances when they can't go fishing, they can still get some earning.

Answer 1

The answer for the last 2 questions should be answered using the concept of a Cartel.

1. Indicate the possible solution for the problem listed on 1. What could you suggest? What is your solution, based on a reasonable argument?  

The fishermen can decide among themselves that hey will fish a fixed amount of fish every day. This will help them maintain their livelihood for a longer time at the cost of short term gains. Rapid fishing will deplete the fish population and in the long run there will be no economic activity and it will be harmful for the community as a whole.

C.        What are the implications and outcomes of your argument? Did you choose the right argument? If yes/no why?

If the above decision is taken, there will be incentives for the fishermen to cheat. If they decide on a fixed quantity of let's say 100 fish a day, then the fisherman who fishes 101 fishes will be better off than the others. All the fishermen will think the same and eventually the collaboration will break down and it will not be possible to continue with that. It is a classic case of a Prisoner's dilemma where collaborating will give a better output, but the incentive to cheat is more which eventually leads to a harmful outcome.

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