The shepherd may have a 1:100 ratio of warning cost:wolf cost, but his neighbors might only be around 1:10. Giving the twentieth false alarm may be worthwhile to the shepherd, but responding to it wouldn’t be worthwhile for his neighbors. And then nobody would respond to the 21st warning, even if there was a wolf.
Unfortunately, there are two parties involved.
The shepherd may have a 1:100 ratio of warning cost:wolf cost, but his neighbors might only be around 1:10. Giving the twentieth false alarm may be worthwhile to the shepherd, but responding to it wouldn’t be worthwhile for his neighbors. And then nobody would respond to the 21st warning, even if there was a wolf.