Economics for Public Policy Essay Example | Topics and Well Written Essays - 2000 words

Economics for Public Policy - Essay Example In this case, the two firms would benefit from a reduction in the advertisement. In this regard, the legal system is the legal advertisement by the two companies. The anarchy is a situation where both the two firms fail to take part in advertisement. This situation would be beneficial for both the two firms. On the other hand, if Firm B fails to advertise where as Firm A advertise, the advertisement would significantly benefit Firm A. However, the maximum level of advertisement by a single firm is depended on the degree of advertisement undertaken by the other firm (Axelrod, 2004). This means that there is an equal outcome whenever different companies pursue advertisement to a level below the equilibrium. This principle can be applied to different areas such as rational environments. It explains why the presidential candidates in two different parties are actually similar. Whenever the candidates are confirmed in the preliminaries, they would be created inside their camps of partisan . The electorate who are undecided would be categorised in the central political spectrum. The candidates may tend to rash to the middle group so as to appeal to the group. In this case, the assumption is that voters would select the close option thus many votes could be acquired whenever one is in the center. Part b. The benefits of welfare are an efficiency-enhancing insurance scheme, which may insure against incoming risks. Those individuals who hold the illustrations of the prisoner's dilemma believe that the game highlights morality in challenges that are faced by large groups or welfare. Similar to the game of two players, the game with many players pays the cooperating players R, and defecting players P. In welfare, when some individual defect while some cooperate the cooperating players would get an S while the defecting players will get a T. A good example is illustrated in the commons tragedy. All The members of a certain welfare prefer to graze their animals on the common s instead of maintaining the animals on his own land (Axelrod and William, 2006). The common resource will become unsuitable for grazing whenever it is used by a number above the threshold. In this case, there is a derived benefit B that each welfare member can achieve whenever he or she pays a cost C sufficiently. Above n choose C Below n choose C C C+ B C D B 0 Above n choose C Below n choose C C C+ B C D B 0 From the table, there is an assumption that cost C is negative. The dilemma in this case, is to obtain a benefit with no cost incurred. In a situation, that is ideal the benefit is always a be given reward together with the cost. The challenging situation is to incur a cost but no benefit. This means that a payoff is ordered as B>(B+C)>0>C. In this respect, whenever one chooses C he obtains C+B hence the benefits of welfare are an efficiency-enhancing insurance scheme. Response to question 2. Part a. The two categories of voters will include the rich the middle and the poor p ersons. R M P Gross income $13 $4 $3 Willingness to pay $4.5 $1.5 $0.5 . This cannot be said to be a pay off matrix since all the willingness to pay, being penalties needs to be identified as negative numbers. T= [] If we add $4 to each element we get T= ] T=] The first step involves checking for saddle points (Bendor, 2007). This is a point where the unstable and stable manifold has a dimension that fails to be a zero (Axelrod, 2007). In a matrix, it