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  • Example 1.2: Second Price Auction: Figure 1.7

    Diunggah oleh

    Phuong Tran
    4 tayangan1 halaman
    If both suspects testify, both will go to prison, but they will still collect rewards for testifying. Many versions of the prisoner's dilemma have appeared in the social sciences. One example is moral hazard in teams.

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    If both suspects testify, both will go to prison, but they will still collect rewards for testifying. Many versions of the prisoner's dilemma have appeared in the social sciences. One example is moral hazard in teams.

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    Unduh sebagai PDF, TXT atau baca online dari Scribd
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    4 tayangan1 halaman

    Example 1.2: Second Price Auction: Figure 1.7

    Diunggah oleh

    Phuong Tran
    If both suspects testify, both will go to prison, but they will still collect rewards for testifying. Many versions of the prisoner's dilemma have appeared in the social sciences. One example is moral hazard in teams.

    Hak Cipta:

    © All Rights Reserved
    Unduh sebagai PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 1

    Page10

    Figure1.7
    needthemtogivetestimonyagainsteachother.Thepoliceputeachsuspectinadifferentcelltopreventthetwosuspectsfromcommunicatingwitheachother.The
    policetelleachsuspectthatifhetestifiesagainst(doesn'tcooperatewith)theother,hewillbereleasedandwillreceivearewardfortestifying,providedtheother
    suspectdoesnottestifyagainsthim.Ifneithersuspecttestifies,bothwillbereleasedonaccountofinsufficientevidence,andnorewardswillbepaid.Ifonetestifies,
    theotherwillgotoprisonifbothtestify,bothwillgotoprison,buttheywillstillcollectrewardsfortestifying.Inthisgame,bothplayerssimultaneouslychoose
    betweentwoactions.Ifbothplayerscooperate(C)(donottestify),theyget1each.Iftheybothplaynoncooperatively(D,fordefect),theyobtain0.Ifone
    cooperatesandtheotherdoesnot,thelatterisrewarded(gets2)andtheformerispunished(gets1).Althoughcooperatingwouldgiveeachplayerapayoffof1,
    selfinterestleadstoaninefficientoutcomewithpayoffs0.(Toreaderswhofeelthisoutcomeisnotreasonable,ourresponseisthattheirintuitionprobablyconcernsa
    differentgameperhapsonewhereplayers"feelguilty"iftheydefect,orwheretheyfearthatdefectingwillhavebadconsequencesinthefuture.Ifthegameisplayed
    repeatedly,otheroutcomescanbeequilibriathisisdiscussedinchapters4,5,and9.)
    Manyversionsoftheprisoner'sdilemmahaveappearedinthesocialsciences.Oneexampleismoralhazardinteams.Supposethattherearctwoworkers,i=1,2,
    andthateachcan"work"(s
    i
    =1)or"shirk"(s
    i
    =0).Thetotaloutputoftheteamis4(s
    1
    +s
    2
    )andissharedequallybetweenthetwoworkers.Eachworkerincurs
    privatecost3whenworkingand0whenshirking.With"work''identifiedwithCand"shirk"withD,thepayoffmatrixforthismoralhazardinteamsgameisthatof
    figure1.7,and"work"isastrictlydominatedstrategyforeachworker.
    Exercise1.7givesanotherexamplewherestrictdominanceleadstoauniquesolution:thatofamechanismfordecidinghowtopayforapublicgood.
    Example1.2:SecondPriceAuction
    Asellerhasoneindivisibleunitofanobjectforsale.ThereareIpotentialbuyers,orbidders,withvaluations

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