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FEB13068-23 – Political Economy Individual Assignment Worksheet Individual Assignment Name Student number Date Summary of assignment instruction See the assignment instructions for a complete overview of the assignment. Assignment set-up To complete this assignment, you should find an article about recent political events which describes a strategic interaction. You should be able to analyse this event using one of the models from the course. The assignment consists of three parts: 1. Preparation (40% of assignment grade) In this part, you will answer some questions about the news event and chosen model to prepare for the second part. You can be technical in answering these questions. You can presume significant economic knowledge on the part of the reader when writing this section. 2. Op-ed (opinion essay) (40% of assignment grade) In the second part, you must write an op-ed describing the recent event and provide some analysis based on your theoretical knowledge. You should write the op-ed as if you are writing for the Economist or New York Times. That means your text should be understandable for people who lack economic understanding. Your column should at least: a. Include a summary of the recent event. b. Provide a coherent explanation of the relevant theory and its predictions. c. Critically analyse the event using the theory. That is, what choice should the players make? Explain why this prediction does (not) match with the actual observed behaviour. d. Also, explain the limitations of your analysis as applied to the context at hand. Are there elements you cannot explain? Could you think of relevant extensions? 3. Reflection (20% of assignment grade) In the final part, you will reflect on your experience using a theoretical model to analyse a real-world scenario. Timeline The assignment is published in week 4. During the tutorials in weeks 5 and 6, time has been reserved for you to ask questions or feedback. The deadline for

FEB13068-23 – Political Economy Individual Assignment handing in the assignment is Friday, 8 December 2023, 18:00 . Please use this document to submit the assignment. Part 1 – Preparation 1. Provide an APA reference to your chosen article. Remember that the article should:  Be written in Dutch or English and be published after 1 January 2023.  Describe some strategic interaction, i.e., it should be suitable to apply one of the game theoretic models. Reid, J. (2023, November 23). Far-right anti-Islam candidate clinches shock Dutch election win. Here's what comes next . CNBC. https://www.cnbc.com/2023/11/23/dutch-election-what-comes- next-after-shock-far-right-victory.html 2. Summarise the situation described in the article (max 200 words). Far-right politician Geert Wilders has achieved a surprising victory in the Dutch general elections, marking a breakthrough after 25 years in politics. His party, the Freedom Party (PVV), secured 37 seats, raising questions about the formation of a coalition government due to previous pledges by some parties not to work with Wilders. Wilders' controversial platform includes anti- immigration policies, Islamophobic measures, and a call for a 'Nexit' from the European Union. Forming a coalition in the 150-seat Dutch parliament is expected to be challenging, with speculation about a potential right-wing government comprising the PVV, Mark Rutte's conservative VVD Party, and Pieter Omtzigt's New Social Contract party. However, such a coalition may require Wilders to compromise on some extreme aspects of his manifesto. The article suggests that while a Wilders-led government may be more antagonistic within the EU, the extent of this could be influenced by coalition partners. The EU is closely monitoring the Netherlands' government formation, and Wilders may need to rule out a 'Nexit' vote to court allies. 3. Translate the situation in game theoretic terms.  Who are the players?  For each player: What is their objective?  For each player: What are their possible strategies/actions?  What information do (you assume) players have? Is it a game of (in)complete and/or (im)perfect information?

FEB13068-23 – Political Economy Individual Assignment In game theoretic terms, the Dutch political scenario post-election can be seen as an extensive form game. Geert Wilders, the leader of PVV, seeks to form a government aligned with his far-right agenda. His potential strategies involve either pushing for his extreme manifesto or moderating his stance to facilitate coalition-building. Other political parties, such as VVD and New Social Contract, act sequentially, deciding whether to form a coalition with Wilders, considering compromises and their voter base's reaction. The EU, another player, observes these moves, assessing Wilders' stance on EU-related matters and anticipating the impact on European unity and policies. Information is incomplete and imperfect, as players may not have full knowledge of each other's preferences and strategies, contributing to the complexity of coalition negotiations in this political game. 4. Choose one of the models discussed in this course to analyse the situation. Briefly explain the set-up of the model and its assumptions. The selected model is the Game Theory model. This game theory encompasses the sequential decision-making process of participants, including Geert Wilders and other political parties, as they endeavour to establish a government. This framework assumes a series of events that align with the real negotiation process that takes place following elections. The term used to describe this solution concept is Subgame Perfect Equilibrium. It signifies that each player's strategy is best not only at a certain decision point but also at all subsequent stages of the game. This refers to the strategic exchanges and decision- making processes involved in the formation of a sequential coalition after the Dutch elections. 5. What are the equilibria of the model? Why are these equilibria? The SPE (subgame perfect equilibrium) is the equilibrium that exists within the Extensive Form (Sequential) Game model. In this game model, players including Geert Wilders and other political parties make appropriate decisions throughout the sequential process of forming a government. Each player selects strategies in such an equilibrium which are optimal for a given decision- point and also subsequently. This constitutes a stable result such that there is no rational reason for any player to change the strategies adopted based on the decisions made by other players. Equilibrium captures the interplay of strategy and decision making within a period framed by the coalitions negotiations post the Dutch election. 6. Explain why you can apply the model to the situation at hand. What assumptions do you need to make about the real-world situation to make it fit? Extensive form game (sequential game) may be applied because it represents similar sequence structure of post-election collation negotiation processes in Netherlands. Parties such as Geert Wilders assume that their rivals act rationally, are aware of the actions taken against them and aim at optimisation

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FEB13068-23 – Political Economy Individual Assignment of their strategies. In reality, if these assumptions are followed then the model would be able to capture what goes on during government formation like strategic interactions and dynamics. 7. Take a normative approach: based on the model, what is your prediction for the situation? What should the players do? In such an Extensive Form (Sequential) Game model-based normative approach, policy objective optimization should be weighed against coalition formulation at every step of the game. While forming a stable coalition, the Netherlands’ leader, Geert Wilders should moderate his extremist plans recognizing the possible resistance. Likewise, other parties seeking to influence policies should consider compromises and policy priorities. Normatively, a cooperative equilibrium in which players will secure strategic consensus and a balanced coalition agreement that mirrors public opinion would be desirable for durable governance. 8. Take a positive approach: what did the players actually do? Compare this actual behaviour to your prediction. Does it match? The formation of coalition by George Wilders was hindered especially after the resignation of Gom Vankrine who retired over fraud charges. In the real world, this contradicts normative prediction that should have considered stable, cooperative coalitions forming for success according to Extensive Form Game theory. What occurs in reality are the obstacles that come along with the route which does not match with the envisaged ideal strategies anticipated in the model. 9. Critically assess the model in the context of the chosen situation: If behaviour differed from your prediction, was the model wrong, or did the players make a mistake? Are there elements of behaviour that remain unexplained by the model? Extensive Form (Sequential) Game is a theory which has been employed as tool in describing strategic interactions during coalition negotiations. The model suggests that in case of failure of wilder’s efforts to form a government there will be a cooperative equilibrium formed wherein both players optimise their strategies for stability. But the actual case involved the resignation of Gom van Strien from his position as a chairman. He was supposed to serve for two years, at a point where the organisation was embroiled in fraud allegations and yet this did not happen. Although players’ behaviour does not imply that there has been a problem with the model, it may simply demonstrate the intricate nature of the actual dynamics. Equilibrium is the predicted state of a market based on a particular model; however it could be disrupted due to unforeseen events including fraud allegations, external factors, and individual decisions. The model may not take into account such things as elements that are personal to some individuals such as personal integrity and others may not account for the possibility of a

FEB13068-23 – Political Economy Individual Assignment third party to scrutinize it. 10. What are the limitations of your chosen model? Can you think of relevant extensions to the model? The extensive form (sequence game) model is subject to some limitations, including the requirements of perfect reason and total information. Politics, particularly in practical contexts, are influenced by sentiment and incomplete data. However, an inherent inflexibility of this model might not be able to take into account increasing preferences or changes in exogenous factors. The addition of behavioural elements, flexible architecture, the stochastic process and external influences in extensions make possible the building of models which reflect complexities in political realities better.

FEB13068-23 – Political Economy Individual Assignment Part 2 – Op-ed The Rise of Geert Wilders in Dutch Politics: A Game-Theoretic Analysis Recently, one of Europe’s political establishments was shocked by the win of a far-right Dutch politician named Geert Wilders on the general elections in the Netherlands. This has led to exploratory investigations into potential implications of coalition building for further dynamic changes in the development of European Union. This opinion article considers the scenario in relation to the Extensive Form (Sequential) Game model following the results of the election and its outcomes to determine the applicability, limits, and implications thereof. The significant victory of Geert Wilders who won almost 25% of the parliamentary seats signifies a substantial shift in the political environment of the Netherland. The success of his anti-immigrant and euro-skeptical agenda is not just causing anxiety in the Netherlands, but across Europe too. There remains some doubts on the internationalism that will come out of the success of Wilders at the national level. These show by what an extent this winning in election will alter, not domestic policy alone but also the development of European consensus and union, when coalition talks are shaping up. This will help in understanding why Wilders has been rising politically, in the Netherland and at Europe as well. The Extensive Form (Sequential) Game model adopted here as a game theoretic framework stems from a sequential decision making process on the basis of coalition talks. The model requires that the participants look at the options and consequences, so as to have the ability to make sound decisions. The model therefore predicts that there would be the stabilized government as the most desired outcome of coalition formation and people will maximize their own choices to reach the cooperative equilibrium. In actual sense, the model’s predictions concerning the stable coalition’s talks characterized with careful consideration of concessions and political objectives do not correlate with what exists on ground. Also, the sudden resignation of Gom van Stern as Wilders’ negotiator against charges of corruption offers some dynamics that the model does not fully capture. This sudden change is a statement that other factors can play a more significant role in influencing the model than the problem of own moral character. Secondly, the model is incapable of accounting for the complexities that arise from the early comments made by potential coalition partners, such as Dilan Yeşilgoz-Zegeruis, who showed hesitancy towards the coalition formed under the leadership of Wilders. These early commentaries by others may be seen as manoeuvres meant for lobbying and forming coalition in the chess like politically divided world. Furthermore, such political expert may also perceive them as calculated move towards coalition building. However, one thing still remains true that no one can predict what Although the Extensive form sequence game is revealing in many ways, it highlights surprising events and anticipated games. This implies that while modelling makes assumptions of perfect reason as a political character; the reality is quite different and emotional driven. Fraud claims that go beyond expectations were directed at Gom van Strien, thereby disclosing how much the model depends on it being imperfect information assumptions. In addition, the static nature of the model restricts it in that it ignores the impact of the media, the fickleness of political actors’ preferences, and the changing patterns of public opinion. Flexibility is required during coalition’s negotiations because unforeseen events are likely to occur, and in such cases, the structure should be able to adjust itself as the situation changes.

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FEB13068-23 – Political Economy Individual Assignment However, the model captures some useful insights regarding the strategic interactions in Dutch coalition talks. Behavioural additions may be added in the future to enhance the appropriateness of the paradigm and better illustrate departures from pure reason. In this regard, adjusting the model to a dynamic game scheme by keeping in mind the evolving tastes and impacts of external factors would probably help to overcome the model’s rigidity. Stochastic components may enhance the real picture about political surroundings to counteract unpredictable and unplanned events. In conclusion, the Extensive Form (Sequential) Game models explain strategic behaviour in Dutch coalition talks; however, it has limited use when faced with unexpected events and political parties’ strategic manoeuvring. The framework offers many valuable ideas but additional studies will need to be done for a better comprehensive study of political decision making nuances. Despite all the criticisms directed towards game theory, it is still an important tool for interpreting politics and coalition formation among states in order to govern. Part 3 – Reflection Please reflect on your experience using a model to understand an actual news event. Your answers can be brief. 1. Briefly reflect on your experience using a model for a real-world situation. Was it easy or difficult to do? By taking a systems approach, coalition formation might be thoroughly examined and analyzed in a standardized manner. Still, the expected balance was upset by the interference of real-world circumstances, as demonstrated by Gom van Strien's resignation. To navigate between theoretical forecasts and unanticipated occurrences, one needed a sophisticated political landscape comprehension. This highlighted how well the model explained strategic interactions, but it also showed how poorly it captured the dynamic character of political dynamics. The study added value by improving analytical techniques and recognizing the complexities present in political situations. It demonstrated the interaction between theory and practical application. 2. Did you gain a new insight into the situation because you used a model to analyse it? In other words, do you now understand something about the behaviour you did not before? Why (not)? Using Extensive Form (Sequential) Game model as a basis for studying political scene in the Netherland was based on more systematic approach. The model described logical thinking of political actors, explaining complexities inherent for a coalition agreement. Nevertheless, this was offset by the sudden resignation of Gom van Strien, which added an element of intricacy beyond

FEB13068-23 – Political Economy Individual Assignment what the theoretical model could fully grasp. A gap between predictions from the model, and reality proved that perfect reasoning and total information cannot be assumed for. Moreover, the model can also predict cooperative equilibrium following a reasonable decision thereby making it possible to understand optimal strategy. However, the case of the Netherlands’ president, Gom Van Strien shed light on issues surrounding external factors, problems with integrity and information, which were beyond the model’s assumptions. The model provided generally a conceptual framework that when applied on actual situations made it easy to understand political behaviour. The model clearly revealed that there were dynamics in politics which could only be captured by including behavioural components, dynamic frameworks, as well as incorporation of stochastic factors. The examination noted the subtlety within theory versus action providing additional insight into how politics influences the decisions people use through consideration of issues unconsidered before. Lastly, the event confirmed the saying that even though theoretical models are very vital they cannot fit on a real situation without involving the subtleties of human activities and decisions dynamics in an active political arena. 3. Do you think it is valuable to use theoretical insights to analyse real-world situations? Why is it (not) relevant? Indeed, applying theory to the analysis of actual incidents is quite helpful. Theoretical frameworks provide an ordered approach to making sense of complex circumstances. In essence, the Extensive Form (Sequential) Game was a powerful model with which to break down strategic linkages within Dutch politics. It provided a basis for rational decision making that translated into the decryption of players’ actions as well as possible results. Further, it provides the basis for identifying universal principles and patterns that cut across different contexts. Accordingly, they assist predictive understanding by establishing a platform with which to envisage likely results and reactions within rapidly changing conditions. Nevertheless, it is essential to acknowledge the shortcomings and adjust models for the intricacies of the actual environment. Theoretical insights can provide a good starting point, but they become useful only when they are used to guide real-world decision- making. Using models improve understanding of complex real life situations as they provide orderly way in which to analyse, predict and plan. Theory integrates theory of practice that supports comprehensive understanding. It offers knowledge bases for decision maker’s perspectives. Basically, the value of theoretical insights is based on them being models through which complex dynamics implicit in real life are understandable and managed.

FEB13068-23 – Political Economy Individual Assignment Appendix on the use of Generative AI (if applicable) I did not use Generative AI in my response. I used insights from the lecture notes and the news article to respond to the paper prompts.

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