Practice%20Problems%20Social%20Science%20Tools

Practice%20Problems%20Social%20Science%20Tools - tariff:...

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POL 130 Practice Problems for Expected Utility and Backwards Induction Expected Utility A particular member of the House of Representatives is voting on a bill that would impose an increased (import) tariff on textiles. He also happens to be facing reelection this coming November; he is uncertain as to whether or not he will win reelection. His personal policy preferences are such that he is free trade oriented. Therefore, he would most prefer to get reelected without having to vote to impose the tariff. But he really wants to get reelected. His preferences/utilities are as follows: Utility of getting reelected, having voted against imposing tariff = 25 Utility of getting reelected, having voted for imposing tariff = 20 Utility of not getting reelected, no matter how he voted = -10 1 His district happens to have a lot of labor in the textile industry (who support the tariff), so his probability if getting reelected is affected by whether or not he votes to impose the
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Unformatted text preview: tariff: Probability of getting reelected is .60 if votes to impose the tariff Probability of getting reelected is .50 if votes against the tariff a) Compute the expected utility of voting to impose the tariff. b) Compute the expected utility of voting against imposing the tariff. c) What is the rational choice for this member of Congress? Why? 1 i.e. he is indifferent between the outcomes of not getting reelected having voted for the tariff and not getting reelected having voted against the tariff Game Theory- Extensive Forms Games Solve for the equilibrium of the following games using backwards induction. (1, 3) (3, 4) (4, 1) (1, 2) Senate President President Do not veto Veto Slightly increase foreign aid Greatly increase foreign aid Veto Do not veto (1, 2) (4, 2) (3, 4) (1, 3) Senate President President Do not veto Veto Slightly increase foreign aid Greatly increase foreign aid Veto Do not veto...
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Practice%20Problems%20Social%20Science%20Tools - tariff:...

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