Unit 5 - Property and Power Flashcards
What are Institutions
Written and unwritten rules governing social interactions
How to Institutions enforce rules
Via constraints and incentives:
Constraints = What players can or cannot do
Incentives = Rewards and punishments
What is Power
The ability to get what you want in opposition of others
What is Bargaining power
The extent of your advantage in an interaction to gain more economic rent etc
Who has Bargaining power in the Ultimatum game and how could this change
The proposer has more bargaining power
However if there is an increase in number of respondents –> Lower bargaining power
What is Pareto Efficiency
A solution that cannot be altered to make a player better off without worsening another player
Substantive judgements of fairness
vs
Procedural judgement of fairness
S = How fair the outcome is e.g. income equality
P = How fair the procedure is e.g. equality of opportunity
What is Pareto Improvement/domination
A change or outcome that benefits at least one person without making anyone else worse off
How can we prevent the prisoners dilemma in e.g. investing in renewable technologies for firms
Enforcers can punish firms that do not invest
What is the Principle Agent Problem and how could it be battled
The idea that firms and enforcer have different objectives. firms want higher profit whereas enforcer want higher income.
To battle it you could link the enforcers income to profits. Perhaps only pay the enforcer if the desired goal is achieved (both firms invest in renewable technology)
