unit 4 Flashcards
why do government interest differ (3)
stage of economic development
possession and use of natural resources
Vulnerability to the impacts of climate change
what is an example of a social dilemma
climate change
what is a social dilemma
when people do not take adequate account of the effects of their actions on others whether these are positive or negative.
An example may be overusing antibiotics for minor illnesses which may help recover quickly but creates antibiotic resistance that has much more harmful effects on others
what is the tradgedy of the commons
Free resources e.g. air that are not owned by anyone are easily over exploited unless access is controlled in some way.
if you live with family it may be hard to keep the bathroom clean, when one person cleans, everyone benefits. Whoever cleans bears the cost while the others are free riders
how to solve social dilemmas
by being altruistic
what is meant by altruistic actions
Altruistic actions: an individual sacrifices their life for others who are not family members and can be total strangers
what is means by alturistic motivations
when people care about how their actions will effect others
what are strategic interactions
Strategic interaction: when people are engaged in a social interaction and are aware of the ways that their actions affect others and vice versa
what is a strategy
A strategy is defined as an action that a person may choose while being aware of the mutual dependence of the outcomes on their own and others actions
what is a social interaction
Social interactions are situations in which there are two or more people making a decision
the actions taken by each person affect both their own outcome and the other people’s outcome
what is game theory
Game theory is a set of models of strategic interactions.
what is a game (5)
A game is a description of a social interaction, which specifies:
* The players: Who is interacting with whom
* The feasible strategies: Which actions are open to the players
* The order of play: When the players choose their actions
* The information: What each player knows when making their decision
* The payoffs: What the outcomes will be for each of the possible
combinations of actions.
what assumptions are made in the cassava rice game (5)
There are no other people involved or affected
The selection of which crop to grow is the only decision that anil and bala need to make
They interact just once
It is a simultaneous game: the players make their decision simultaneously, not knowing what the other person has decided to do
They know exactly what would happen in each possible outcome
what is nash equilibirum
a set of strategies in which each player plays a best
response to the strategies of the other players is called a Nash equilibrium.
Usually if the game has one Nash equilibrium it is the best outcome
what is the pareto criteria
Consider two possible allocations A and B, if everyone prefers outcome A then this is a pareto criterion
The Pareto criterion makes no value judgement beyond the least controversial one that an allocation is better if it makes at least one person better off and no one worse off.
what is Pareto efficiency
an allocation that is not pareto dominated by any other allocation. If an allocation is pareto efficient then there is no alternative allocation in which at least one party would be better off and nobody worse off.
draw backs of using pareto efficiceny to decision make (4)
There is often more than one pareto efficient allocation
The pareto criterion does not tell us which pareo efficient allocation is best: it doesn’t rank
A pareto efficient allocation is not always better than a pareto inefficient one
There may be other criteria that matter more e.g. fairness of both allocations and their outcomes
what is dominant strategy equilibrium
If the best response of one player is always the same strategy,
regardless of the strategy of the other player, then we say that
this is the player’s dominant strategy.
If there is an equilibrium where both players are playing their
dominant strategy, we call this a dominant strategy
equilibrium.
what is prisoners dilema
when Nash equilibrium is an option that cause harm even is there is other options that would benefit both players more
what is altruism
Altruism is a social preference in which an individual’s utility is
increased by benefits to others
what is inequality aversion
Inequality aversion is a preference for more equal outcomes.
what is spite and envy
Spite and envy are cases in which benefits to others may reduce the
individual’s utility.
how can soical interactions be modeled
Social interactions can be modelled as games
Players choose best responses to others’ strategies
what can influence peoples social preferences
social norms
culture
policy
morals
what is a social norm
A social norm is an understanding that is shared among most members of a community about how people should behave toward each other in particular circumstances e.g. giving a birthday gift to a family member.
how can a social dilemma be resolved
Social dilemmas e.g. prisoners dilemma can be resolved by:
social preferences
peer punishment
binding agreements
The rules of the game also matter for outcomes
what causes a coordination problem
Multiple Nash equilibria can cause coordination problems
Economic and political institutions can help achieve socially optimal outcomes
why did people stop contributing as much money in the ultimatum game
they did not like others free riding and the only way to stop that is by reducing contributions
what does cooperation mean
Cooperation means participating in a common project in such a way that mutual benefits occur. It need not be based on agreement.
why may someone choose to cooperate (3)
They have social preferences: they are altruistic, or prefer fairness, or wish to reciprocate cooperative behaviour by others
Their behaviour is guided by social norms: shared understanding that people in certain situations should cooperate and behave well towards each other or that resources should be allocated fairly.
They interact with each other repeatedly allowing behaviour today to be rewarded, reciprocated or punished in future
what are the rules of the ultimatum game (5)
The proposer is provisionally given $100
The proposer decides how much money, y, to offer to the responder
The responder can either accept or reject the offer
If the offer is rejected they both get nothing
Otherwise the responder receives y and the proposer receives 100 - y
what is a sequential game
the proposer chooses an action first followed by the responder.
what is a coordination game
each player would like to ensure that their action coordinates with their opponents action
why does conflict of interest occur in a coordination game
Conflict of interest occurs in a coordination game if players in the game would prefer different nash equilibria
what is a hawk dove game
players can act like an aggressive and selfish hawk or a peaceful and sharing dove. Doves restrict and hawks continue with BAU. The conflict of interest is that each country does better if it plays hawk while the other plays dove.
what government policies can be introduced to change the game so (restrict, restrict) is Nash equilibrium (4)
Sustainable consumer lifestyles
Governments could stimulate innovation and the diffusion of cleaner technologies
A change in norms
Countries can share the costs of restrict more evenly
