Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 19, Problem 7E
To determine
To explain:
The allotment process and the people who will be allocated if some college classes are more popular than others.
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Suppose that in each of two periods, society must decide whether to protest the policies of the state. When society protests, the state may either acquiesce or repress. Society gets 1 if the state acquiesces, -1 if the state represses, and 0 if it does not protest.
Suppose there are two types of states: Moderate and Hardline. The moderate state (M) gets 0 if the protest does not take place, -2 if it acquiesces, and -3 if it represses. The hardline (H) state gets 0 for no protest, -2 for repression, and -3 for acquiescing. Let p0 be the prior probability the state is M. Let p1 be society’s updated belief that the state is M, after observing the actions in period 1.
(a) Draw the game in extensive form specifying who moves when, the set of actions available at each node and the final payoffs for both players (clearly denote information sets).
(b) Is there an equilibrium where the M-state always acquiesces when there is a protest, the H-state always represses when there is a…
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