Week 2

Question 1

What is a social dilemma

Answer 1

a situation in which actions taken independently by self-interested individuals result in socially suboptimal outcome

eg. climate change or traffic jams

Question 2

what is the tragedy of the commons

Answer 2

common property or common resources are often overexploited

think old time example of common pastures and sheep

Question 3

what is free riding?

Answer 3

a few bear the costs while everyone enjoys the benefits

Question 4

In game theory what is a player

Answer 4

a player is someone who is involved in the interaction

Question 5

in game theory what is a feasible strategy

Answer 5

the actions each player can take

Question 6

in game theory what is the information

Answer 6

what each player knows when choosing their action

Question 7

in game theory what is the payoffs

Answer 7

the outcomes for every possible combination of actions

Question 8

in game theory what is a one shot game

Answer 8

when the players only interact once

Question 9

in game theory what is the best response

Answer 9

the strategy that yeilds the highest payoff, given the others players strategy

Question 10

in game theory what is the dominant strategy

Answer 10

a best response to all possible strategies of the other player

Question 11

In game thoery what is the dominant strategy equilibrium

Answer 11

an outcome of a game in which everyone plays their dominant strategy

Question 12

What is the nash equillibrium

Answer 12

a set of strategies - one per player - such that each players strategy is the best response to the strategies chosen by everyone else

no player has an incentive to deviate unilaterally

there may be more than one nash equilibrium

Question 13

What is the prisoners dilemma

Answer 13

a game with a dominant strategy equillibrium in which player the dominant strategy yeilds lower individual and total payoffs compared to other strategies

socially optimal outcome is not achieved

Question 14

What is the invisible hand

Answer 14

Adam Smith

conditions under which individuals pursuring their own interests, without regard for the interests of others can be consistent with the common good

under the right laws and economic institutions (pp and competition) the economy would be guided towards a socially beneficial outcome

Question 15

what is a self-interest preferences

Answer 15

when a person with self-interested preferences choose to take some action, she only accounts for how it affects her personally ignoring the effects on others

Question 16

what is a social preference

Answer 16

a person with these preferences cares not only about how her action affects her personally but also about how it affects other people

Question 17

What is the public goods game

Answer 17

the prisoners dilemma in which there are more than two players

Question 18

what is altruism

Answer 18

a willingness to help someone else at a cost to yourself

Question 19

what is repcoricty

Answer 19

a desire to help those who have in your opinion acted well and to harm those who have acted poorly

Question 20

what is inequality aversion

Answer 20

a dislike of unequal outcomes even if you benefit from the disparities but especially if others are doing better than you

Question 21

what is a nash equilibrium

Answer 21

A set of strategies, one for each player in the game, such that each player’s strategy is a best response to the strategies chosen by everyone else.

Question 22

in game theory how do you make players pay for the consequences of their actions

Answer 22

repeated games

social norms

peer punsihment

Question 23

what is the dictator game

Answer 23

a decider is given money by the experimenter

decider chooses whether to allocate the money to the recipient and how much

the recipient cannot respond

Question 24

what is the ultimatium game

Answer 24

decided is given money by the experimenter

decider chooses whether to allocate money to the recipient and how much

recipient can accept or reject the money - if rejects then neither gets the money

Question 25

what is the relationship b/w nash equilirbium and the dominant strategy

Answer 25

a dominant strategy is the best response to all strategies by the other players, a dominant strategy equilibrium therefore must be a nash equilibrium

Question 26

what is the hawk-dove game

Answer 26

the hawk is the aggressive player and the dove is the peaceful species

in terms of climate change the dove restircs and the hawks continues with BAU - conflict of interest here is that each country does better if it plays hawk while the others play doves

different from other nash equilibrium games as the players adopt two different strategies

Question 27

What are ostroms principles for managing a commons

there are 8 btw

Answer 27

1. define clear group boundaries
2. match rules governing use of common goods to local needs and conditions
3. ensure that those affected by the rules can participate in modifying the rules
4. make sure the rule-making rights community members are respected by outside authorities
5. develop a system, carried out by community members, for monitoring members behaviour
6. use graduated sanctions for rule violators
7. provide accessible, low cost means for dispute resolution
8. build responsibility for governing the common resources in nested tiers from the lowest level up to the entire interconnected system

these are dependent on the context - it is possible to find a common good

Question 28

what are the solutions to the climate change game

Answer 28

technology
- clean tech like offshore and tidal are good technology to focus for growth in the UK

co-benefits
- govt should focus on clean even if they are only interested in promoting growth
- clean tech is a good technology to focus on leveling up

transfers