195 Ch4

Question 1

Common Pool Resource Definition

Answer 1

Numerous users share a common resource making it hard to manage the resource in a way that would maximize its long-term yield.

Question 2

Negative Externality

Answer 2

When an individual or firm engages in some activity that imposes a cost on society that does not have to be paid by the party generating the externality.
-Challange: When actor does ‘too much’ of activity from standpoint of society

Question 3

Positive Externality

Answer 3

When a private activity generates a benefit that spills over to other members of society.
- Challange: When private actor does too little of things w/ broader social benefits

Question 4

Property rights

Answer 4

legal right to exercise control over some resources

Question 5

Transaction Costs

Answer 5

cost of conducting a transaction

Question 6

Coase Theorem

Answer 6

Externalities will be corrected by the market without gov intervention if:

1) Property rights are clearly defined
2) Transaction costs are nonexistent

Question 7

Prisoner’s Dilemma

Answer 7

depicts how 2 rational agenties, each trying

Question 8

Dominate Strategy (Pris Dil)

Answer 8

Strategy that best benifits the respective prisoner (Ratting the other out)

Question 9

Iterated Game

Answer 9

Pris Del game that repeats and allows players to experment w/ certian kinds of behavior, and build trust/predictablity

Question 10

Arms Race

Answer 10

variation on the prisoners dilemma model

-When both countries spend more on weapons, neither is safer, and both are poorer

Question 11

Zero sum game

Answer 11

Fixed pay off

Question 12

Positive sum games

Answer 12

pay off that can get larger under some circumstances

Question 13

negative sum games

Answer 13

pay off that gets smaller as time goes on

Question 14

negative feedback loop

Answer 14

(Vicious cycle) some incident or behavior that leads to a bad outcome which induces behavior that makes the situation even worse

Question 15

Positive feedback loop

Answer 15

some behavior that causes a positive outcomewhich induces additional positive behavior

Question 16

Equilibruim

Answer 16

some relatively stable outcome even in the face of changing behavior or circumstances

Question 17

Collective action problems

Answer 17

whien each individual in a group pursues a rational strategy, yet the collective outcome is bad for all of those same individuals creating “collective irrationality”

Question 18

Free Riders

Answer 18

Those who enjoythe benifits of group action without contributing to the effort

Question 19

Common pool resources

Answer 19

Resources which more than one individual has access but where one persons consumption reduces the potential value of the resource. to others (Tragity of the commons)