This preview shows page 1. Sign up to view the full content.
Unformatted text preview: librium to this game?
(c) Now assume that each Congressman gets a further utility of Ci (that is, CF for Frank and
CB for Beans) for going along with the party leadership. CF and CB will be delivered
to each Congressmen in the form of money for a reelection campaign, should they vote
for the law. Re-write the normal-form game with these C’s included.
(d) Derive an expression for each C that describes the minimum utility that the party
leadership has to o↵er to get Frank and Beans to vote for the law. In other words,
1 the party leader wants to set CF and CB such that the Nash equilibrium is for each
Congressman to vote for the law.
(e) Explain in words why this situation is “strategic.” That is, why does Frank care what
Beans does and vice-versa?
(f) Now assume Beans is sick of Congress and plans to quit to work for the Devil (in his
human form, George Steinbrenner). Assume that this changes Beans’ outlook only because he cannot use any more campaign funding; but he still cares what his constituents
think of him. How does this alter your answer to the question before? Hint: the two Cs
will now be di↵erent.
3. Two ﬁrms (cleverly called Firm 1 and Firm 2) produce the famous Transcendental Flibquat
for delivery to Saybrook College. Each ﬁrm has a marginal cost that is MC for all values of
Q. The inverse demand for Flibquats can be written as P = b cQ, where Q = q1 + q2 .
(a) Derive each ﬁrm’s Courno...
View Full Document