Net Present Value NPV is the current value that we place on a project whose life spans a number of years. We use discounting to reflect the fact that current costs and benefits matter more to us than costs and benefits in the future. An outcome is pareto efficient if it is not possible to make one party better off without hurting another. Pareto Improvement A situation which makes one player better off while making no other player worse off. Policy Analysis Multidisciplinary, applied social science.
Purpose is to inform policy choice.
Draw on Economics, Statistics, Political Science, Law, Ethics, Sociology, and Psychology. The dilemma is that individuals, acting in their own self interest, arrive at an outcome that is collectively irrational. If the players were able to work together, they could each be better off. Temptation of a player's highest payoff leads to defection. Communication , trust built through playing the game repeatedly, and contracts are methods of gaining cooperation.