Session 2

Question 1

Justify Ordnungs- und Prozesspolitik on the basis of Prisoners Dilemma

Answer 1

Nashs’ Prisoners Dilemma indicates, that
collective irrationality occurs if no sanctions are enforced or aren’t effective. Ordungs- und Prozesspolitik measures can change this to collective rationality behavior. (Chewing gum in Singapur)

Question 2

Name concepts and characteristics of Public Choice Theory

Answer 2

These Theories try to explain political decisions on the grounds of rational behavior, e.g. economic theory of homo economicus.

• bounded rationality: (Only consider buying favorite ice cream flavor)
• positive analysis: Why is it?
• normative analysis: How can it be better?

Question 3

Explain the Condorcet Paradox

Answer 3

An election result cannot reflect the preferences of society in a transitive way when voters choose pairwise between parties.

Question 4

Explain the Median Voter Theorem

Answer 4

Political Parties become more similar to adhere to median voter preferences in order to secure more votes

Question 5

Explain the Rent seeking optimum

Answer 5

For politicians and companies alike, rent seeking is profitable. Additional non-market incomes are gatherd at the expanse of other groups with governmental assistance.