Deck 3: The Origins of the Modern State

Question 1

What is (are) the Nash equilibrium (equilibria) in the game shown below?

A) Cooperate; Cooperate
B) Cooperate; Cooperate and Defect; Defect
C) Cooperate; Defect
D) Defect; Defect
E) Defect; Cooperate

Answer 1

D

Question 2

-What would you expect the outcome of this game to be?

A) I would expect both players to cooperate.
B) I would expect both players to defect.
C) Because there was more than one Nash equilibrium, it is difficult to say what the actual outcome of the game would be.

Answer 2

B

Question 3

What is (are) the Nash equilibrium (equilibria) in the game shown below?

A) D; d
B) none of these
C) U; u
D) D; u
E) U; d

Answer 3

A

Question 4

What is (are) the Nash equilibrium (equilibria) in the game shown below?

A) U, u
B) none of these
C) U, u; D, d
D) D, u; U, d; D, d
E) D; d

Question 5

What is (are) the Nash equilibrium (equilibria) in the game shown below?

A) U, u; D, d
B) none of these
C) U, u
D) D, u; U, d
E) D, d

Question 6

What is (are) the Nash equilibrium (equilibria) in the game shown below?

A) U, u; U, d
B) none of these
C) U, u
D) D, u
E) U, d

Question 7

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-What payoff would Toshiba get if it chose to produce HD DVD and Sony chose to produce Blu-Ray?

A) 1.
B) 2.
C) 3.
D) 4.

Question 8

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-What payoff would Sony get if it chose to switch to HD DVD and Toshiba chose to produce HD DVD?

A) 1.
B) 2.
C) 3.
D) 4.

Question 9

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-Which of the following preference orderings describes the way that Toshiba ranks the four possible outcomes? (Note: if X > Y, then X is preferred to Y.)

A) Both players produce HD DVD > Toshiba produces HD DVD, Sony produces Blu-Ray > Both players produce Blu-Ray > Toshiba produces Blu-Ray, Sony produces HD DVD.
B) Both players produce HD DVD > Both players produce Blu-Ray > Toshiba produces HD DVD, Sony produces Blu-Ray > Toshiba produces Blu-Ray, Sony produces HD DVD.
C) Both players produce Blu-Ray > Both players produce HD DVD > Toshiba produces HD DVD, Sony produces Blu-Ray > Toshiba produces Blu-Ray, Sony produces HD DVD.

Question 10

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-What is (are) the Nash equilibrium (equilibria) in the game?

A) Switch to Blu-Ray; Blu-Ray and HD DVD; Switch to HD DVD
B) Switch to Blu-Ray; Blu-Ray
C) HD DVD; Blu-Ray
D) HD DVD; Switch to HD DVD

Question 11

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-What is (are) the expected outcome (outcomes) of the game?

A) Because there was only one Nash equilibrium, I would expect both players to choose the strategies that constitute that equilibrium.
B) Because there was more than one Nash equilibrium, it is difficult to say what the actual outcome of the game would be.

Question 12

DVD Player Game
In 2006, there were a number of media reports about the next generation of DVD players, which produce much clearer picture and sound than that produced by current machines. However, there are two competing formats, Blu-ray (Sony) and HD DVD (Toshiba). Both are affiliated with certain movie studios, which have agreed to release their movies in one or the other of the new formats. This creates a problem for the producers of this new technology-they all want their own version to win out, but by competing they make it entirely likely that most consumers will sit back and wait until (a) one of the formats is a clear winner or (b) a newer, even better, method of supplying movies is developed by someone else. If the latter happens, both Sony and Toshiba lose out.
Imagine that both companies have developed a new product, but with different formats. If one of the companies would be willing to switch quickly (assume that copyright laws would allow it to produce something similar), that company would lose some time and market share but be able to get into the market. Consumers would be more willing to buy the new technology, and both companies would make more money. If neither company is willing to coordinate with the other, they end up in a war of attrition, with fewer customers. This is shown in the game below.

-In the game, do the players (Sony and Toshiba) move simultaneously or sequentially?

A) Simultaneously
B) Sequentially

Question 13

Military Intervention Game
In the strategic game shown in Figure 1, below, the military in some unidentified country is split between those who wish to intervene in the political system and launch a coup (overthrowing the civilian government) and those who wish to maintain their apolitical position as members of the armed forces. Both military factions prefer that the military act as a cohesive unit, however.
Figure 1: Normal Form Military Intervention Game

-What is (are) the Nash equilibrium (equilibria) in the game?

A) Launch coup; Launch coup
B) Stay out; Stay out
C) Launch coup; Stay out
D) Launch coup, Launch coup and Stay out; Stay out

Question 14

Military Intervention Game
In the strategic game shown in Figure 1, below, the military in some unidentified country is split between those who wish to intervene in the political system and launch a coup (overthrowing the civilian government) and those who wish to maintain their apolitical position as members of the armed forces. Both military factions prefer that the military act as a cohesive unit, however.
Figure 1: Normal Form Military Intervention Game

-What can you say about how you expect the two factions to act if they were to play this game?

A) I would expect both players to launch a coup.
B) I would expect both players to stay out.
C) I would expect the interveners to launch a coup and the professional faction to stay out.
D) I would expect either A or B above would occur, but the game doesn't allow me to say anything about which one is more likely.

Question 15

Military Intervention Game
In the strategic game shown in Figure 1, below, the military in some unidentified country is split between those who wish to intervene in the political system and launch a coup (overthrowing the civilian government) and those who wish to maintain their apolitical position as members of the armed forces. Both military factions prefer that the military act as a cohesive unit, however.
Figure 1: Normal Form Military Intervention Game
A similar situation between two military factions is shown in the extensive form game shown below. The key difference with the earlier game is that the faction that wishes to take over the civilian government makes the first move.
Figure 2: Extensive Form Military Intervention Game

-What is the subgame perfect Nash equilibrium?

A) Launch coup; Launch coup, Launch coup
B) Stay out; Launch coup, Stay out
C) Launch coup; Launch coup, Stay out
D) Launch coup, Launch coup and Stay out; Stay out

Question 16

Military Intervention Game
In the strategic game shown in Figure 1, below, the military in some unidentified country is split between those who wish to intervene in the political system and launch a coup (overthrowing the civilian government) and those who wish to maintain their apolitical position as members of the armed forces. Both military factions prefer that the military act as a cohesive unit, however.
Figure 1: Normal Form Military Intervention Game
A similar situation between two military factions is shown in the extensive form game shown below. The key difference with the earlier game is that the faction that wishes to take over the civilian government makes the first move.
Figure 2: Extensive Form Military Intervention Game

-If you were the leader of the military faction that wished to maximize its chances of intervening in your county's politics, would it make a difference whether you were playing the Military Intervention Game shown in Figure 1 or the Military Intervention Game shown in Figure 2?

A) Yes, I would prefer to be playing the game in Figure 1.
B) Yes, I would prefer to be playing the game in Figure 2.
C) No, it wouldn't make a difference to me which of the two games I was playing.

Question 17

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-what is this sort of game more generally called?

A) prisoner's dilemma
B) pure coordination game
C) chicken
D) asymmetric coordination game

Question 18

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-What is (are) the Nash equilibrium (equilibria) of the game?

A) Reduce Tariffs; Reduce Tariffs
B) Reduce Tariffs; Impose Tariffs
C) Impose Tariffs; Reduce Tariffs
D) Impose Tariffs; Impose Tariffs
E) there is no Nash equilibrium

Question 19

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-Does the European Union have a dominant strategy in the Free Trade Game?

A) Yes, reduce tariffs
B) Yes, impose new tariffs
C) No

Question 20

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-Does the United States have a dominant strategy in the Free Trade Game?

A) Yes, reduce tariffs
B) Yes, impose new tariffs
C) No

Question 21

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-What is (are) the expected outcome (outcomes) of the game?

A) Increased free trade.
B) lost jobs in European Union (EU), increased revenue for United States.
C) increased revenue in EU, lost jobs in the United States
D) trade war
E) can't say because there was no Nash equilibrium

Question 22

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-Using the payoffs from the Free Trade Game, what is the present value of reducing tariffs?

A) 4/(1 − δ)
B) 3/(1 − δ)
C) 4 + 2δ/(1 − δ)
D) δ/(1 − δ)

Question 23

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-Using the payoffs from the Free Trade Game, what is the present value of imposing new tariffs?

A) 4/(1 − δ)
B) 3/(1 − δ)
C) 4 + 2δ/(1 − δ)
D) δ/(1 − δ)

Question 24

Free Trade Game
Free trade occurs when goods and services between countries flow unhindered by government-imposed restrictions such as tariffs, quotas, and antidumping laws that are often designed to protect domestic industries. Although it is well known that free trade creates winners and losers, a broad consensus exists among most economists that free trade has a large and unambiguous net gain for society as a whole. For example, Robert Whaples (2006) finds in a survey of economists that "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and that "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries." Despite this consensus, it is not at all clear that countries will actually adopt policies promoting free trade.
Consider the following strategic situation in which the United States and the European Union (EU) are engaged in trade negotiations. Both countries must decide whether to reduce their tariffs or impose new tariffs. The best outcome for both countries is for them to impose new tariffs and for the other side to reduce tariffs; they could then export more easily to the other country and they would obtain increased revenue from the new tariffs. The worst outcome for both countries is for them to reduce tariffs and for the other country to increase tariffs; they would lose jobs as a result of reduced exports and the other country would benefit from their lower tariffs. Of the remaining two outcomes, both countries prefer the outcome in which they reduce tariffs to the one in which they both impose new tariffs. If both countries reduce their tariffs, then each country can benefit from increased free trade. If both countries impose new tariffs, there is a trade war in which each country sees a decline in trade and a loss of jobs. Based on this story, the preference ordering for the EU over the four possible outcomes is:
• Impose; Reduce > ; Reduce > Impose; Impose > Reduce; Impose.
And the preference ordering for the United States is:
• Reduce; Impose > Reduce; Reduce > Impose; Impose > Impose; Reduce,
where the EU's action is given first, the United States' action is given second, and ">" means "is strictly preferred to."
Using the ordinal preferences (4, 3, 2, 1) to capture these preference orderings, fill in the empty payoff matrix. Based on the preference orderings in the Free Trade Game.
Figure 1: Free Trade Game

-Is there a discount rate that it is possible to sustain (reduce tariffs; reduce tariffs) as a Nash equilibrium in this repeated Free Trade Game if the European Union and the United States use grim trigger strategies? If so, what is it?

A) Yes: δ > 0.25.
B) Yes: δ > 0.50.
C) No.
D) Yes: δ > 0.75.

Question 25

Mafia Game
In Chapter 4, we described the Prisoner's Dilemma Game in which two prisoners had to choose between ratting out their partner or keeping quiet. The Nash equilibrium in this game involved both prisoners' deciding to talk even though they would both have been better off keeping quiet. If any of you watch episodes of Law and Order, TV's longest running crime series, this scenario will probably be very familiar to you. However, many of you will probably be aware that there are certain types of criminals in the real world who rarely talk or rat out their accomplices. In particular, it is well known that members of the Mafia or Cosa Nostra rarely provide incriminating evidence against their accomplices. Why is this? The answer is that the Mafia organization imposes a cost, often physical and deadly, on anyone who talks to the police. This additional cost changes the structure of the strategic situation in which the two prisoners find themselves. Rather than playing the traditional Prisoner's Dilemma, we can think that the prisoners are playing a Mafia Game with a payoff matrix like the one shown in Figure 1, below; "c" is the cost imposed by the Mafia on a suspect who talks.
Figure 1: Mafia Game

-What is (are) the Nash equilibrium (equilibria) of the Mafia Game if c = 0?

A) Quiet; Quiet
B) Talk; Talk
C) Quiet; Talk and Talk, Quiet
D) Quiet; Quiet and Talk; Talk

Question 26

Mafia Game
In Chapter 4, we described the Prisoner's Dilemma Game in which two prisoners had to choose between ratting out their partner or keeping quiet. The Nash equilibrium in this game involved both prisoners' deciding to talk even though they would both have been better off keeping quiet. If any of you watch episodes of Law and Order, TV's longest running crime series, this scenario will probably be very familiar to you. However, many of you will probably be aware that there are certain types of criminals in the real world who rarely talk or rat out their accomplices. In particular, it is well known that members of the Mafia or Cosa Nostra rarely provide incriminating evidence against their accomplices. Why is this? The answer is that the Mafia organization imposes a cost, often physical and deadly, on anyone who talks to the police. This additional cost changes the structure of the strategic situation in which the two prisoners find themselves. Rather than playing the traditional Prisoner's Dilemma, we can think that the prisoners are playing a Mafia Game with a payoff matrix like the one shown in Figure 1, below; "c" is the cost imposed by the Mafia on a suspect who talks.
Figure 1: Mafia Game

-In the Mafia Game, what is the minimum cost that the Mafia needs to impose on members who talk in order for the Nash equilibrium to be one in which both suspects keep quiet?

A) anything greater than 10
B) 5
C) anything greater than 5
D) anything greater than 0

Question 27

American Football Game
In an American football game, we can think that the offense has four possible strategies to progress down the field: run the ball, short throws, medium throws, and long throws. The defense has three strategies to try to stop this: counter the run, counter the pass, or blitz the quarterback. Let's say that after studying many games, statisticians have come up with the payoff matrix shown in Figure 1, below, where the numbers in each cell indicate the expected number of yards either gained by the offense or lost by the defense. As you can see, every yard gained by the offense is a yard lost by the defense. As always, the players prefer higher numbers to lower numbers.
Figure 1: American Football Game

-What is (are) the Nash equilibrium (equilibria)?

A) Run; Counter run
B) Short pass; Counter pass
C) Run; Blitz
D) Medium pass; Counter pass

Question 28

American Football Game
In an American football game, we can think that the offense has four possible strategies to progress down the field: run the ball, short throws, medium throws, and long throws. The defense has three strategies to try to stop this: counter the run, counter the pass, or blitz the quarterback. Let's say that after studying many games, statisticians have come up with the payoff matrix shown in Figure 1, below, where the numbers in each cell indicate the expected number of yards either gained by the offense or lost by the defense. As you can see, every yard gained by the offense is a yard lost by the defense. As always, the players prefer higher numbers to lower numbers.
Figure 1: American Football Game

-Does the offense have a dominant strategy?

A) Yes: Run
B) Yes: Short pass
C) No
D) Yes: Medium pass
E) Yes: Long pass

Question 29

A common factor in standard definitions of "the state" is

A) that the state is an entity that uses force and/or coercion.
B) that the state is an entity that controls a given territory.
C) that those who govern are chosen by representative elections.
D) all of these are common factors in the definition of the state.
E) Only (A) and (B) apply to standard definitions of the state.

Question 30

According to the definition of the "state" in Chapter 4, both democratic and nondemocratic states rule through coercion and the use of force.

Question 31

A failed state is a statelike entity that cannot coerce and is unable to successfully control the inhabitants of a given territory.

Question 32

The contractarian view of the state sees the creation of the state as resulting from a social contract between individuals in the state of nature in which the state provides security in exchange for obedience from the citizen.

Question 33

Social contract theorists see a security dilemma as existing primarily between

A) individuals.
B) states.
C) individuals and the state.
D) ethnic groups.

Question 34

"The state of nature" describes situations in which there is no state.

Question 35

Individuals enjoy civil rights in the state of nature.

Question 36

Scholars who take a predatory view of the state see a security dilemma as existing primarily between

A) individuals.
B) states.
C) individuals and the state.
D) ethnic groups.

Question 37

The predatory view of the state holds that states that exercise an effective control over the use of violence are in a position to threaten the security of citizens, and thereby exploit them.

Question 38

Those who imagine that life in the state of nature is intolerable (or, for instance, "nasty, brutish, and short") are more likely to

A) accept a state only if it is subject to strict limits on what it can demand of its citizens.
B) accept giving up a great deal of rights (and revenue. in exchange for a state capable of offering protection.

Question 39

If the state is seen as a benign third party willing to protect citizens from each other in exchange for taxes, this is referred to as the

A) contractarian view of the state.
B) predatory view of the state.
C) state of nature.

Question 40

As discussed in Chapter 4, Tilly argues that states first developed in early modern Europe when rulers (lords, kings, and the like). tried to eliminate or neutralize both internal and external rivals, to protect their own citizens (subjects), and to raise enough revenue to be able to carry out these activities. A key part of Tilly's argument is that the principal goal of these rulers was to

A) stay in power.
B) develop a state.
C) maintain the loyalty of subjects

Question 41

According to Tilly, the political geography of modern Europe (that is, the development of states) was essentially an unintended consequence of the strategies employed by lords and kings to keep a grasp on power.

Question 42

If a state can use force against its citizens, and can use this coercive ability to demand that its citizens provide it with as much revenue (wealth, taxes, and so on) as it chooses, why wouldn't a state act in a predatory manner?

A) They do-we should expect all states to be predatory in an unlimited fashion.
B) If a state expects to be able extract more resources over time by committing to limit its predation, then it should do so.

Question 43

According to the discussion of the contractarian view of the state in Chapter 4, in order for a state (civil society) to emerge from an initial "state of nature" situation, it must be the case that the state (a) is willing to impose sufficiently high punishments to deter individuals from engaging in antisocial behavior and (b) is also willing to refrain from taxing its citizens excessively.

Question 44

What is/are the defining characteristics of a state?

A) it is an entity that exists in a given territory
B) it is an entity that rules through coercion
C) it is an entity created by social contracts
D) it is an entity that rules through coercion in a given territory

Question 45

In Chapter 4, Somalia was used as an example of a failed state. What country invaded Somalia in December 2006 to help prevent the emergence of an Islamic state?

A) Eritrea
B) Djibouti
C) Ethiopia
D) Kenya
E) Darfur

Question 46

Why does Tilly describe the state as a protection racket?

A) because the state promises to protect the citizens
B) because the state falsely promises to protect the citizens
C) because the state promises to protect the citizens from dangers that it poses to them
D) because he is referring to dictatorial states

Question 47

Answer the questions about the following game
Game 1:

-What are the Nash equilibria in Game 1? Respond in the form (Player 1's strategy; Player 2's strategy).

Question 48

Answer the questions about the following game
Game 1:

-Which strategy combination produces a Pareto optimal outcome (in Game 1)?

Question 49

Answer the questions about the following game
Game 2:

-What is the Nash equilibrium in Game 2?

Question 50

Answer the questions about the following game
Game 2:

-What strategy combinations produce pareto optimal outcomes (in Game 2)?

Question 51

Answer the questions about the following game
Game 3:

-What is the subgame perfect equilibrium in Game 3? Please answer in the form (Player 1's strategy; Player 2's strategy).

Question 52

Answer the questions about the following game
Game 3:

-What strategy combinations would produce pareto optimal outcomes in Game 3?

Question 53

Answer the questions about the following game
Game 3:

-What might the players find frustrating about Game 3?

Question 54

Answer the questions about the following game
Game 4:

-What is the subgame perfect equilibrium in Game 4? Please answer in the form (Player 1's choice; Player 2's choice at top node, Player 2's choice at bottom node).

Question 55

Answer the questions about the following game
Game 4:

-What strategy combinations would lead to pareto optimal outcomes in Game 4?

Question 56

Answer the questions about the following game
Game 4:

-What is similar about their structure?

Question 57

Answer the questions about the following game
Game 4:

-What is different about their structure?

Question 58

Answer the questions about the following games
Game 2:

Game 4:

-What, if anything, is different about the expected behavior of the players in Games 2 and 4?

Question 59

Answer the following questions about the game in Figure 1
Figure 1

-List all of the logically possible strategy combinations for the game in Figure 1 (please use the following convention: ["Player 1's strategy;" "Player 2's action at upper node," "Player 2's action at lower node"]).

Question 60

Answer the following questions about the game in Figure 1
Figure 1

-List each of the strategy combinations for the game in Figure 1 that are subgame perfect Nash equilibria.

Question 61

Answer the following questions related to the game in Figure 2.
Figure 2

-List all of the logically possible strategy combinations for the game in Figure 2 (please use the following convention: ["Player 1's strategy;" "Player 2's strategy"]).

Question 62

Answer the following questions related to the game in Figure 2.
Figure 2

-List each of the strategy combinations for the game in Figure 2 that are Nash equilibria.