Now I understand and appreciate your example -- more than perhaps you might
expect. I think it's a terrific example of how collaboration (agreement to
share the burden of decreasing pollution) and competition (assuming that at
least some of these power companies are competing with one another) is more
efficient than competition alone. While some might argue that this has
always existed and assumed in free market theories, I don't think so.
There's nothing "free market" about requiring companies to reduce pollution
as a whole.
I see game theory at play, er, at work, in this example. For the
participants, there is a Prisoner's Dilemma decision to be made, figuring
out if it's more beneficial to the other power producers or itself as they
offer and price the right to pollute.
Very interesting.
Nick
