Take home final Fall 2013

The points for each question are indicated at the start. Please explain your reasoning. The exam is “open book,” feel free to consult notes and posted readings- but please do not copy text with out attributing the correct source. You may first read the exam and then spend time refreshing your reading of the course content before starting the exam. Answers should not be excessively long and completed within the time frame.

1.      [25] Twitter: Consider the 100 students in a country who considering a protest to change government policy. Suppose that if more than 50% of the students turn up at the protest then they are a big enough group to change the policy but if less than 50% turn up they will fail to change the policy. Moreover a student faces a 10% risk of being arrested if less than 50% turn up. Suppose that the benefit to each student of changing the policy is 10 and the cost of being arrested is -10 so the expected cost of arrest is -1.

(a) If we think of this as strategic situation where each student has to decide to join the protest and that equilibrium is when each student is choosing their own best action given the action of the other students. What do you think is the equilibrium outcome(s). Explain your reasoning.

(b) Suppose now the students all have twitter and can communicate endlessly to each other. What do you think is the most likely equilibrium outcome? The Turkish Prime Minister Ergodan, recently tried to regulate twitter does your answer suggest why.2.      [25] Development: The guest lecture by Dollie Davis (paper attached) presented a discussion of three reasons why some countries have remained poor. Explain what you think of the argument that the role of institutions and the “rule of law” are important to economic development.

3.      [25] FCC: In the mid 1990s the government introduced spectrum auctions as a market allocation mechanism replacing the traditional allocation by administrative decisions process. Why do think this change was implemented and did it improve welfare?

4.      [25] Polarization: Explain the apparent increase in political polarization in the US- in particular what do you think are the major drivers of polarization and why. 

 

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