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BPP Field Exam 2006 Answers (view source)
Revision as of 19:02, 20 February 2011
, 19:02, 20 February 2011no edit summary
'''c.) Returning to the one-shot/no-reputation case, consider what would happen if partnership shares are not distributed evenly, and members have probabilities of being recognized which are proportional to their shares. What would be the equilibrium strategies and outcomes you would expect in this case?'''
As noted on the top of page 1189 of the article: "in a two-session legislature, if the members have different probabilities pi of being recognized, each has a continuation value vi(1, g) = pi for any second session subgame. Then, if any member k is recognized in the first stage, he or she can offer delta*pi to the ith member and that member will vote for the proposal. Member k will thus choose the (n-1)/2 members with the lowest pi. Note that depending on the probabilities the member with the lowest probability of recognition may have the highest ex ante value of the game, and the member with the highest probability of recognition may have the lowest ex ante value of the game."
'''d.) Finally, consider what would happen if both voting rights and recognition probabilities were proportional to the shares held, what would you expect in this case?'''
