Question 1

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?

Accepted Answer

A trade war is a likely outcome when countries impose tariffs or other barriers on each other to protect their own industries, leading to retaliatory actions.

Question 2

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?

Accepted Answer

The best choice is for both countries to reduce tariffs. This is because both countries prefer reducing tariffs to imposing new tariffs, and it is the Nash equilibrium outcome. In this outcome, both countries benefit from increased free trade and avoid the negative consequences of a trade war. It is also important to note that the present value of reducing tariffs is not directly related to the choice of outcome, but rather depends on the discount rate (δ) and the payoffs in the game. The present value of reducing tariffs is equal to the sum of the payoffs for reducing tariffs divided by (1-δ). In this case, the present value of reducing tariffs is (3 + 3)/(1-δ) = 6/(1-δ), which is not one of the answer choices given.

Question 3

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?

Accepted Answer

The present value of imposing new tariffs is equal to the immediate payoff of 4 plus the discounted value of the future payoffs, which are 2 in the next period, 1 in the following period, and so on, yielding a sum of 2δ/(1-δ) using the formula for an infinite geometric series. Therefore, the overall present value is 4+2δ/(1-δ). The best choice for both the EU and the US is to reduce tariffs, as this yields the highest payoff for both countries.

Question 4

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?

Accepted Answer

In a repeated game with grim trigger strategies, cooperation can be sustained if the discount factor δ is high enough to make future cooperation more valuable than the short-term gain from defection. For the Free Trade Game, δ > 0.50 is typically sufficient to sustain cooperation as a Nash equilibrium.

Question 5

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?

Accepted Answer

CIn the Mafia Game with c = 0, where c represents the cost of talking, the Nash equilibria are when both players decide to "Talk; Talk" and when their strategies are mixed, meaning one decides to "Quiet; Talk" and the other decides to "Talk; Quiet". This is because, with no cost to talking, the incentive to betray the other before being betrayed oneself leads to a situation where talking becomes a dominant strategy, resulting in the "Talk; Talk" equilibrium. Additionally, the mixed strategies "Quiet; Talk" and "Talk; Quiet" are also equilibria because they represent situations where players unpredictably choose between staying quiet or talking, trying to outguess the other player.

Question 6

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?

Accepted Answer

The answer of Mafia Game
In Chapter 4, we described the...

Question 7

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)?

Accepted Answer

The answer of American Football Game
In an American football game,...

Question 8

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?

Accepted Answer

A dominant strategy in game theory is one that is the best choice for a player, no matter what the other player does. The question does not provide enough context or information about the game or scenario being discussed to determine if there is a dominant strategy related to offensive plays in a sport or game. Therefore, without specific details on the strategies' payoffs or outcomes in various situations, we cannot conclude that any particular offensive strategy (run, short pass, medium pass, long pass) is dominant.

Question 9

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

Accepted Answer

According to standard definitions of "the state," the common factors are that the state is an entity that uses force and/or coercion, and that the state is an entity that controls a given territory. While representative elections may be a characteristic of some states, it is not a universal factor in defining the state. Therefore, option (D) is incorrect, and option (E) is the best choice with the correct explanation.

Question 10

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

Accepted Answer

According to the definition of the "state" in Chapter 4, all states have the monopoly on the legitimate use of force and coercion, regardless of whether they are democratic or nondemocratic.

Question 11

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

Accepted Answer

This is the commonly accepted definition of a failed state.

Question 12

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.

Accepted Answer

The contractarian view of the state indeed sees the creation of the state as resulting from a social contract between individuals, in which the state provides security in exchange for obedience from the citizen. This view is discussed by several philosophers, including Thomas Hobbes, John Locke, and Jean-Jacques Rousseau.

Question 13

Social contract theorists see a security dilemma as existing primarily between

Accepted Answer

The answer of Social contract theorists see a security dilemma...

Question 14

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

Accepted Answer

"The state of nature" refers to a hypothetical scenario in which there is no government or social order, and individuals are in a "natural" or "primitive" state of existence.

Question 15

Individuals enjoy civil rights in the state of nature.

Accepted Answer

In the state of nature, individuals do not have civil rights as there is no governmental authority to enforce such rights. Civil rights are established and protected by a functioning government.

Question 16

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

Accepted Answer

Scholars with a predatory view of the state argue that the state itself can be a threat to individuals, creating a security dilemma between individuals and the state.

Question 17

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.

Accepted Answer

The predatory view of the state posits that states can use their monopoly on violence to oppress citizens and thereby exploit them.

Question 18

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

Accepted Answer

The notion that life in the state of nature is intolerable implies a belief in the need for protection and security, which can be provided by a strong state. Therefore, those who hold this view are more likely to accept giving up rights and revenue in exchange for the protection provided by a capable state.

Question 19

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

Accepted Answer

The contractarian view of the state holds that individuals enter into a social contract where they surrender some of their freedoms and agree to be governed by the state in exchange for protection of their rights and security. The state is seen as a benign third party that provides essential services and protection to citizens in exchange for taxes. The predatory view of the state, on the other hand, sees the state as a coercive entity that uses its power to extract resources from individuals for the benefit of the elite. The state of nature is a theoretical construct in political philosophy that describes a world without any form of government or social structure.

Question 20

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

Accepted Answer

Tilly argues that the primary goal of early modern rulers was to stay in power by eliminating rivals, protecting their citizens, and raising revenue. Developing a state and maintaining the loyalty of subjects were secondary goals in achieving this primary goal.

Quiz 3: The Origins of the Modern State