midterm 1 - grading key questions 1&3

midterm 1 - grading key questions 1&3 - 1. Applying...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 . Applying the social welfare function to the two preference profiles, we obtain A B C for the first profile C B A for the second profile Now, note that pairwise ranking of the alternatives A and C is the same for each of the three groups for the two profiles of preferences. However, while A C under the first profile, we have C A under the second. This is a violation of IIA. A similar example can be given with alternatives B and C , but not with A and B .( 10 points ) 3 .( a ) Let b x and b z denote the bids of player X and Z . Then, note that when v y max b x , b z , bidding less that v y does not change anything for Y because he would loose the auction anyway. Also, when v y max b x , b z bidding anything above max b x , b z results in the same outcome because the winner, which would be Y in this case, pays only the second highest price. However, note that when
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/14/2012 for the course ECON 201 taught by Professor Witte during the Spring '08 term at Northwestern.

Page1 / 2

midterm 1 - grading key questions 1&3 - 1. Applying...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online