<p>Insect behavior is influenced by the presence of defense chemicals in herbaceous plants. In particular, which plants insect herbivores choose as host plants is influenced by the composition of volatile chemicals emitted by plants including chemical defense compounds. If plants grow in vicinity to each other, their chemical plumes may overlap, and the effectiveness of allocating resources to the defense of a focal plant may depend on the defense strategies employed by neighboring plants in the environment. We incorporate a neighborhood defense effect by applying spatial evolutionary game theory to optimal resource allocation in plants, where cooperators are plants investing in defense, and defectors are plants that do not. The optimal resource allocation problem is solved using a stochastic dynamic programming model, and the neighborhood effect is incorporated using a spatial game theory algorithm. We incorporate an individual-based model for an herbivore population and allow herbivores to move between herbaceous plants growing in seasonal environments. Our model predicts under which conditions natural selection may select for the entire population to consist of only cooperators, only defectors (pure stable strategies), or a mixture of both (mixed stable strategy). We show that our model offers a theoretical explanation for the neighborhood effect seen in empirical studies.</p>