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Pol. Econ Mid term
Collective Action and Rational Choice
29
Political Studies
Undergraduate 4
11/19/2009

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Cards

Term
What are the traditional theories of Collective Action?
Definition

1. Functional: Groups exist because there is a social need for them

2. Cultural: common interests lead to collective action

3. Psychological: Humans hardwired for group activity

Term
What is the political economy approach to collective action?
Definition
People join groups when their expected utility for joining outweighs the costs of participation
Term
Collective Action is a public good? True or False.
Definition
True
Term
What are the characteristics of a public good?
Definition

1. Nonexcludability-individuals can't be excluded from consuming it.

2. Nonrivaledness-my consumption doesn't take away from your enjoyment

3. Jointness of supply-Needs at least 2 or more people to supply it. 1 person can't do it.

Term
Gives some examples of a public good
Definition

1. Lighthouse. It's non-exludable and nonrivaled. Problem is that 1 person can build it and supply it. Not the best example.

BETTER EXAMPLES:

1. Fireworks show

2. National Defense

3. Clean air

Term
Successful cooperation is determined by:
Definition

1) Limited number of producers

ex. bananas and copper

2) Elasticity of product: how price-sensitive consumers are to change in price. ex. banana price v. oil price

3) Availability of close substitutes

4) Innovation (more efficient use of resources)

Term
What is the tragedy of the commons?
Definition
A situation where it is difficult to prohibit use of a valuable resource (non-excludability), but wherein the resource is RIVALED.
Term
Common Pool Resources are:
Definition
Not quite public goods. CPRs are rivlaed.BUT solutions to CPRs are collective action problems.
Term
Can you create a common pool resource problem?
Definition

Yes. By subsidizing or providing wider access to an excludable and rivaled (private good), you essentially create a ruse to use it.

Examples: Oklahoma Land rush, raods, National Parks, etc.

Term
What are the solutions to CPR problems?
Definition

1) Hierarchy-Laws, rules, regulations (coercion)

2) Markets: creating tradeable property rights

3) Community: Relying on a set of common values or norms to allocate resources

Term
Game Theory
Definition
Relates to collective action. Primary constraints are the choices of other individuals. Key Concept of game theory: finding the equilibrium point. A point where no single individual has an encentive to deviate from their current choice.
Term
Types of Game Theory
Definition

1. Prisoners Dilemma-competitive

2. Chicken-competitive

3. Assurance game-cooperative game

Term
Prisoners Dilemma
Definition

Situation where even though mutual cooperation is in the interests of all players, it is in the interest of the individual to not cooperate.

The equilibrium point is mutual defection (non cooperation).

However, from a collective action standpoint, this does not make sense. Look at the preference profile:

P1: Y>W>Z>X

P2: X>W>Z>Y

The individual decision of defection (Z) is worse than the c.a. decision which would be W (neither snitch).

Term
What is Nash Equilibrium?
Definition

A point where no player can benefit by changing his/her strategy; if all other players keep their strategy unchanged.

Mutual defection is a nash equilibrium in the P.D.

Term
Two types of P.D.
Definition

1. Prisoners dilemma (person to person)

2. N-Person prisoners dilemma (you v. the world)

Term
How do you get people to participate/overcome prisoners dilemma?
Definition

Give them individual benefits (ex Starbucks card, or ppl monitoring u in small groups)

EX: Civil rights movement. BReak people down in smaller groups, like churches.

Term
How is the chicken game different from the P.D?
Definition
The incentives were changed. Therefore, there are two equilibrium points. Non-cooperation in this game means both die. Signaling is important in the chicken game.
Term
Assurance Game
Definition

It's a coordination game because you need to coordinate plans, otherwise you are both (or all) messed up.

1. Multiple equilibria

2. coordination needed

3. info is crucial..need to be clear

3. clear signals to show true motives.

EXAMPLE: prof. gill coffee.

Term
Chicken v. P.D. incentive structure
Definition

P.D.:

1. Y>W>Z>X

2. X>W>Z>Y (one equilibrium)

Chicken:

1. X>Z>Y>W

2. Y>Z>X>W (two equilibria)

Term
How are assurance games similar/diff to Prisoners Dilemma?
Definition

Cooperation is in the interest of the entire gorup (pareto efficient).

However assurance are much easier to solve because there is a mutual cooperation point at pareto efficient. No incentive to defect/

Term
Example of Assurance game:
Definition

1. Daylight savings time

2. Hockey helmets

3. Metric system

4. HD TV

 

Term
Can a prisoners dilemma become an Assurance game?
Definition

Yes. It's all about iteration and reputation. If my reputation is being a cheater, no one is going to want to play with me. Therefore, I need to have a good reputation.

Iteration allows for learning and trust-building. It allows people to see mutual advantage in cooperative strategies.

cooperation dependent on if iteration ends at a known point. "backward induction" occurs when you know the end point...destroying cooperation.

Term
How do you solve cooperative dilemmas
Definition

The main political and economic challenge in cooperative games is to get people to move from mutal defection to mutual cooperation...and stay there.

CREATE INSTITUTIONS

1) Hierarchy solution

2) Market (individually contract)

3) Community

Term
Define Rational Choice
Definition

Your ability to achieve your goals are affected by other people trying to achiever their goals. This involves strategic constraints. *Conflict and cooperation*

Term
What are the asumptoins of Rational Choice theory?
Definition

Assumptions of Rational Choice:

1.      Utility Maximization

o   People make strategic decisions to get the most utility for the least cost.

o   Thin & Thick Rationality

2.      Expected Utility

o   The world is filled with:

-Risk: Outcomes with known probabilities

-Uncertainty: Outcomes with unknown probabilities

Term
Prospect Theory
Definition

Prospect Theory: Illustrates cognitive limits of rationality.

·         People tend to choose low-valued guaranteed gains over higher-valued expected gains.

·         People tend to fear expected losses over certain losses even if the certain loss will be greater

·         People tend to exaggerate rare low risk probabilities, and discount common high risk probabilities. EXAMPLE: Flying in a plane vs. driving a car, DEAL OR NO DEAL..

 

Term
Price discrimination
Definition

The ability to charge different people different prices based upon the utility that they derive from a product.

-Enhanced by monopoly power and difficulty in reselling product. Need to find a mix.

 

Example:

a) sales and coupons ‘after Christmas sale.

b) temp-sensitive soda machine

c) airline tickets

d) Indulgences: Roman Catholic church had people to pay to get out of hell. Private confessionals.

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