HW6NotesAdd - not provide the public good even though each student would be better off if the good were supplied g Does pre-play communication help

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Additional Problems for Homework 6 1. Consider the first version of the public goods game. Remember that in this game the Payoff for keeping your red card is $5 + (# of red cards handed in), and the Payoff for handing in your red card is just (# of red cards handed in). Assume that there are 39 people in the experiment. a. Is there a dominant strategy in this public goods game? If so, what is it? b. If everyone keeps his red card (does not contribute to the public good), what is the payoff to each student? c. If everyone hands in his red card (contributes to the public good), what is the payoff to each student? d. Does this game have a Pareto Optimum? If so, what actions does everyone take and what is the payoff to each student? e. Is the Pareto Optimum stable in the sense that no one would be willing to defect from this action? Explain. f. In two or three sentences, comment on the following statement: The main problem in this game is that it is in each student’s best interest to
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Unformatted text preview: not provide the public good, even though each student would be better off if the good were supplied. g. Does pre-play communication help the problem? Is it credible? Explain. 2. Now consider the Referendum game. Remember that a majority of “yes” votes would give the government the authority to confiscate everyone’s red cards and basically force everyone to provide the public good. Assume that if the Referendum does not pass, then no one has a chance to contribute to the public good, and everyone just gets a payoff of $5 (everyone keeps their red card). a. In this Referendum game, is there a dominant strategy? b. In the context of an international environmental problem such as climate change, is the Referendum game a realistic possibility? Why or why not? We will be doing another experiment in class on Wednesday. Please arrive on time....
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This note was uploaded on 04/02/2010 for the course ECON Econ 115 taught by Professor Kolstad during the Spring '10 term at UCSB.

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