Lecture 1

Question 1

what did adam smith do?

Answer 1

defended capitalist systems

Question 2

what did marx do?

Answer 2

opposed capitalist systems

Question 3

what is a coordination problem?

Answer 3

a situation in which people act independently opposed to acting in a coordinated manner, considering others

Question 4

when does coordination failure occur?

Answer 4

when a coordination problem isn’t addressed by appropriate institutions

Question 5

what are the consequences of coordination failure?

Answer 5

overuse of resources
underuse of resources

Question 6

what are examples of coordination problems?

Answer 6

global environment protection
social & economic costs of congestion

Question 7

what are external effects?

Answer 7

externalities

uncoordinated activities of people pursuing their own ends can produce outcomes that are worse for all

Question 8

how are coordination problems addressed?

Answer 8

have people internalise external effects

change institutions

Question 9

define institutions

Answer 9

laws, informal rules & conventions which regulate social interactions among people & between people

e.g., laws, social pressures, mutual expectations

Question 10

define game theory

Answer 10

use of mathematical models & verbal arguments to analyse the outcomes of interactions for participants

Question 11

what are the components of a game

Answer 11

players
strategy sets
strategy profile
order of play
information
payoffs