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FPP Homework 1

This document contains 6 questions from a homework assignment on foundations of public policy. Question 1 involves calculating expected utilities for a person deciding whether to go to graduate school based on the probability of a good job market. Question 2 analyzes a collaboration game. Question 3 examines a game of chicken. Question 4 looks at a military escalation game. Question 5 considers a revolution game with 3 players. Question 6 analyzes a study group game with 4 students deciding whether to study.

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49 views3 pages

FPP Homework 1

This document contains 6 questions from a homework assignment on foundations of public policy. Question 1 involves calculating expected utilities for a person deciding whether to go to graduate school based on the probability of a good job market. Question 2 analyzes a collaboration game. Question 3 examines a game of chicken. Question 4 looks at a military escalation game. Question 5 considers a revolution game with 3 players. Question 6 analyzes a study group game with 4 students deciding whether to study.

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February 14, 2023

Foundations of Public Policy Homework Assignment #1

Question 1.
Consider a person deciding whether to go back to graduate school next year. The person is making
this decision facing uncertainty about what next year’s job market is likely to look like. Her most
preferred outcome is not to go to school and have a good job market. Her next most preferred
outcome is to go to school and have a good job market. Her next most preferred outcome is to go
to school and have a bad job market. And, from her perspective, the worst possible outcome is not
to go to school and have a bad job market. Suppose she has a vnm expected utility function over
the four possible outcomes given by

u(No School, Good Job Market) = 10


u(School, Good Job Market) = 8
u(SChool, Bad Job Market) = 7
u(No School, Bad Job Market) = 1.

Suppose, finally, that she believes the probability of a good job market is a number p between 0
and 1.
(a) Calculate her expected utility from going to school [1 point].

(b) Calculate her expected utility from not going to school [1 point].
(c) For what values of p is going back to school a best response [1 point]?

Question 2.
Consider the game in Figure 1 in which each player can either act collaboratively or selfishly. If the
players both collaborate, then they get a very good outcome. But if one player acts selfishly, the
other wants to act selfishly.

Figure 1: Collaboration game

(a) Write down each player’s best response correspondence [1 point].


(b) Identify all the (pure strategy) Nash equilibria of the game [1 point].

Question 3.
Consider the game of chicken in Figure 2 below. A player can continue or swerve. The goal is to
continue and have your opponent swerve. But if you both continue, you crash, which is bad.
(a) Write down each player’s best response correspondence [1 point].

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Figure 2: Chicken game

(b) Identify all the (pure strategy) Nash equilibria of the game [1 point].

Question 4.
Consider the game of military escalation in Figure 3 below.

Figure 3: Military escalation game

(a) Write down each player’s best response correspondence [1 point].


(b) Identify all the (pure strategy) Nash equilibria of the game [1 point].

Question 5.
Consider a game in which there are 3 people. Each player can either participate or not participate
in a revolution. If at least 2 people participate, the revolution succeeds.
If the revolution succeeds, each player gets a benefit of B. If the revolution fails, each player gets
a benefit of 0. Each player who participates bears a cost c < B, whether or not the revolution
succeeds.
(a) Write down each player’s best response correspondence [1 point].

(b) Is it a Nash equilibrium for no players to participate? Why or why not [1 point]?
(c) Is there a Nash equilibrium in which only one player participates? Why or why not [1 point]?
(d) Is there a Nash equilibrium in which only two players participate? Why or why not [1 point]?

(e) Is it a Nash equilibrium for all three players to participate? Why or why not [1 point]?

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Question 6.
Four students–let’s call them 1, 2, 3, and 4–are in a study group together. Each must simultaneously
and independently decide whether or not to study before their study session. Studying will help
them pass their midterm. The value to a student of passing the midterm is 8. The value of failing
is 0.

A student who does not study passes with probability 1/8. A student who studies passes with
probability n/4, where n is the number of students (including himself) who studied. By way of
example, if only students 1, 2, and 3 studied, they would each pass with probability 3/4 and student
4 would pass with probability 1/8.

Different students face different costs from studying. In particularly, the cost to student 1 is 1, the
cost to student 2 is 2, the cost to student 3 is 6, and the cost to student 4 is 8.

Suppose each student aims to maximize her expected payoff. Expected payoffs are found as follows.
Suppose only students 1, 2, and 3 study. Then student 1’s expected payoff is 34 × 8 − 1 = 5, student
2’s expected payoff is 43 × 8 − 6 = 0, and student 4’s expected payoff is 18 × 8 = 1.

(a) Is it a Nash equilibrium for all students to study [1 point]?


(b) Is it a Nash equilibrium for students 1, 2, and 3 to study, but not student 4 [1 point]?
(c) Is it a Nash equilibrium for students 1 and 2 to study, but not students 4 and 4 [1 point]?

(d) Is it a Nash equilibrium for just student 1 to study [1 point]?


(e) Is it a Nash equilibrium for no one to study [1 point]?

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