【正文】 2020 Pearson AddisonWesley If Hopes increase the number of airplanes to 3, it will win the election if Fears propose 4. If Fears decrease the number of airplanes to 3, it will win the election if Hopes propose 2. Both parties propose 3 airplanes and each party gets 50 percent of the votes. Providing Public Goods 169。 2020 Pearson AddisonWesley With more than 3 airplanes, MSC exceeds MSB. Resources can be used more efficiently if fewer airplanes are provided. So only at the quantity at which MSB = MSC are resources used efficiently. Private production would produce 0 airplanes. Providing Public Goods 169。 2020 Pearson AddisonWesley The economy’s marginal social benefit of a public good is the sum of the marginal benefits of all individuals at each quantity of the good provided. The economy’s marginal social benefit curve for a public good is the vertical sum of all individual marginal benefit curves. Providing Public Goods 169。 2020 Pearson AddisonWesley The FreeRider Problem A free rider enjoys the benefits of a good or service without paying for it. Because no one can be excluded from the benefits of a public good, everyone has an incentive to free ride. Public goods create a freerider problem—the absence of an incentive for people to pay for what they consume. Providing Public Goods 169。 2020 Pearson AddisonWesley Figure shows this fourfold classification of goods and services. Public Choices 169。 2020 Pearson AddisonWesley Rival A good is rival if one person’s use of it decreases the quantity available for someone else. A Brink’s truck can’t deliver cash to two banks at the same time. A fish can be consumed only once. Nonrival A good is nonrival if one person’s use of it does not decrease the quantity available for someone else. The services of the LAPD and a concert on work television are nonrival. Public Choices 169。 2020 Pearson AddisonWesley Public Choices Bureaucrats try to get the biggest possible budget for their departments and provide public goods and services. 169。 2020 Pearson AddisonWesley Public Choices Why Governments Exist Governments exist for three reasons. They and maintain property rights. nonmarket mechanisms for allocating scare resources. arrangements that redistribute ine and wealth. 169。 2020 Pearson AddisonWesley 16 PUBLIC CHOICES AND PUBLIC GOODS 169。 2020 Pearson AddisonWesley Tying Arrangements A tying arrangement is an agreement to sell one product only if the buyer agrees to buy another different product as well. Some people argue that by tying, a firm can make a larger profit. Where buyers have a differing willingness to pay for the separate items, a firm can price discriminate and take a larger amount of the consumer surplus by tying. Antitrust Law 169。 2020 Pearson AddisonWesley Antitrust Law 169。 2020 Pearson AddisonWesley Antitrust Law Antitrust law provides an alternative way in which the government may influence the marketplace. Antitrust law is the law that regulates oligopolies and prevents them from being monopolies or behaving like monopolies. The Antitrust Laws The two main antitrust laws are ?The Sherman Act, 1890 ?The Clayton Act, 1914 169。 2020 Pearson AddisonWesley Figure shows the game tree for a sequential entry game in a contestable market. Repeated Games and Sequential Games 169。 2020 Pearson AddisonWesley One possible punishment strategy is a titfortat strategy. A titfortat strategy is one in which one player cooperates this period if the other player cooperated in the previous period but cheats in the current period if the other player cheated in the previous period. A more severe punishment strategy is a trigger strategy. A trigger strategy is one in which a player cooperates if the other player cooperates but plays the Nash equilibrium strategy forever thereafter if the other player cheats. Repeated Games and Sequential Games 169。D game of chicken is for one firm to do the Ramp。 2020 Pearson AddisonWesley If Nokia does no Ramp。D. 169。D, Nokia’s best strategy is not to do Ramp。D creates a new technology that cannot be patented. Both firms can benefit from the Ramp。 2020 Pearson AddisonWesley The payoff matrix for the Pampers Versus Huggies game. Oligopoly Games 169。D games are also prisoners’ dilemmas. An Ramp。 2020 Pearson AddisonWesley Gear’s view of the world 169。 2020 Pearson AddisonWesley Payoff Matrix 169。 2020 Pearson AddisonWesley The plier incurs an economic loss. The cheat increases its economic profit. Oligopoly Games 169。 2020 Pearson AddisonWesley Each firm agrees to produce 2,000 units and to share the economic profit. The blue rectangle shows each firm’s economic profit. Oligopoly Games 169。 2020 Pearson AddisonWesley Colluding to Maximize Profits Firms in a cartel act like a monopoly and maximize economic profit. Oligopoly Games 169。 2020 Pearson AddisonWesley This industry is a natural duopoly. Two firms can meet the market demand at the least cost. Oligopoly Games 169。 2020 Pearson AddisonWesley Oligopoly Games The Dilemma The dilemma arises as each prisoner contemplates the consequences of his decision and puts himself in the place of his acplice. Each knows that it would be best if both denied. But each also knows that if he denies it is in the best interest of the other to confess. The dilemma leads to the equilibrium of the game. 169。 2020 Pearson AddisonWesley Bob’s view of the world 169。 2020 Pearson AddisonWesley Payoffs Each prisoner can work out what happens to him—can work out his payoff—in each of the four possible outes. We can tabulate these outes in a payoff matrix. A payoff matrix is a table that shows the payoffs for every possible action by each