unit 4

Question 1

Social dilemma

Answer 1

a situation in which actions taken by individuals in pursuit of their own objectives result in an outcome which is inferior to some other feasible outcome that could have occured if people had acted together.

Question 2

Free riders

Answer 2

benefiting from the contributions of others to some cooperative project without contributing oneself

Question 3

altruistic

Answer 3

the willingness to bear the cost in order to benefit someone else

Question 4

game theory

Answer 4

a branch of mathematics that studies strategic interactions, meaning situations in which each actor knows the benefits they receive depend on the actions taken by all

Question 5

social interactions

Answer 5

situations in which the actions taken by each person affect other people’s outcomes as well as their own

Question 6

strategic interaction

Answer 6

a social interaction in which the participants are aware of the ways that their actions affect others and the ways that the actions of others affect them

Question 7

strategy

Answer 7

an action that a person may take when that person is aware of the mutual dependence of the results for herself and for others. the outcomes depend not only on that person’s actions, but also on the actions of others

Question 8

games

Answer 8

models of strategic interactions

Question 9

division of labour

Answer 9

the specialization of producers to carry out different tasks in the production process

Question 10

the payoffs

Answer 10

the benefit to each player associated with the joint actions of all players

Question 11

best response

Answer 11

in game theory, the strategy that will give a player the highest payoff, given the strategies that the other players select

Question 12

dominant strategy

Answer 12

action that yield the highest payoff for a player, no matter what the other players do

Question 13

dominant strategy equilibrium

Answer 13

an outcome of a game in which every player plays their dominant strategy

Question 14

prisoner’s dilemma

Answer 14

a game in which the payoffs in the dominant strategy equilibirum are lower for each player, and also lower in total, than if neither player played the dominant strategy

Question 15

social preferences

Answer 15

preferences that place a value on what happens to other people, and on acting morally, even if it results in lower payoffs for the individual

Question 16

zero sum games

Answer 16

a game in which the payoff gains and losses of the individuals sum to zero, for all combinations of strategies they might pursue

Question 17

public good

Answer 17

a good for which use by one person does not reduce its availability to others

Question 18

revealed preference

Answer 18

a way of studying preferences by reverse engineering the motives of an individual from observations about her or his actions

Question 19

crowding out - 2 uses

Answer 19

1) the observed negative effect when economic incentives displace people’s ethical or other-regarding motivations. in studies of individual behaviour, incentives may have a crowding out effect on social preferences
2) refers to the effect of an increase in government spending in reducing private spending,

Question 20

cooperation

Answer 20

participating in common project that is intended to produce mutual benefits

Question 21

fairness

Answer 21

a way to evaluate an allocation on one’s conception of justice

Question 22

inequality aversion

Answer 22

a dislike of outcomes in which some individuals receive more than others

Question 23

reciprocity

Answer 23

a preference to be kind or to help others who are kind an dhelpful, and to withhold help and kindness from people who are not helpful or kind

Question 24

ultimatum game

Answer 24

take it or leave it offer

Question 25

sequential game

Answer 25

a game in which all players do not choose their strategies at the same time, and players that choose later can see the strategies already chosen by the other players, e.g. the ultimatum game

Question 26

simultaneous game

Answer 26

a game in which players choose strategies simultaneously e.g. the prisoner’s dilemma

Question 27

minimum acceptable offer

Answer 27

in the ultimatum game, the smallest offer by the Proposer that will not be rejected by the Responder. Generally applied in bargaining situations to mean the least favourable offer that would be accepted.

Question 28

expected payoff

Answer 28

the payoff you get if the offer is accepted x probability that it will be accepted

Question 29

Nash equilibrium

Answer 29

A set of strategies, one for each player in the game, such that each player’s strategy is a best response to the strategies chosen by everyone else.

Question 30

political advertising as a prisoner’s dilemma

Answer 30

if one campaign paints a bad picture of the other candidate then they are likely to succeed if the other doesn’t respond. instead when they both shed negative light they lose respect and if they quit using this strategy then they risk losing the election. if they advertised in a positive way it wouldn’t give an advantage to one candidate over the other

Question 31

what do IC look like if one player is totally selfish

Answer 31

vertical lines

Question 32

what do IC look like if one player is somewhat altrusitic

Answer 32

curves - downward-sloping

Question 33

if a person cares just as much about another person’s consumption as their own then IC look like

Answer 33

L shapes (perfect compliments) - can’t increase one’s utility unless the other increases by the same amount

Question 34

if utility is derived from the total of two people consumption then IC look like

Answer 34

diagonal and linear - downward sloping

Question 35

if player derives utility from only other persons consumption then IC look like

Answer 35

horizontal lines

Question 36

when are people happy to contribute to a public good

Answer 36

when it is reciprocated

Question 37

public goods game

Answer 37

a situation in which there is something to gain for everyone by engaging with others in a common project but there is something to lose when others free ride.

Question 38

why doesn’t negotiation always solve economic and social problems

Answer 38

because of conflicts of interest

Question 39

examples of social preferences

Answer 39

altruism, pure self-interest, fairness, inequality aversion- dislike of outcomes where some receive more than others, reciprocity