Cost Sharing for Monitoring El Niño. Suppose the monitoring of El Niño s current costs a total of $12 billion per decade. Over a decade, early warning of the current s path would reduce its damages by $9 billion in the United States, $6 billion in Canada, and $3 billion in Mexico. (Related to Application 2 on page 648.)
a. Does any country, acting unilaterally, have an incentive to monitor El Niño?
b. Do the social benefits of monitoring exceed the costs?
c. Design a cost-sharing arrangement that will cause all three countries to support a monitoring system.