斯科特微觀經(jīng)濟(jì)學(xué)課件Chapter25-Publicgods,consequencesofstrategicvotingbehavior,roleofgov.ppt

Chapter 25,Public Goods, the Consequences of Strategic Voting Behavior, and the Role of Government,2,Public Goods,Private goods Excludability Consumption restricted People - willing to pay Rival consumption Consumption - by one person Decreases availability - others Public goods Nonexcludability Nonrival consumption,The Free-Rider Problem,Free-rider problem Members of society Incentives Take advantage of public good Not paying,3,Pareto-Optimal Conditions - Economy with Public Goods,Pareto-optimal allocation, private goods Same MRS (goods) Same MRTS (inputs) MRS=MRT Public goods Once produced All consume same amount,4,Pareto-Optimal Conditions - Economy with Public Goods,Pareto-optimal allocation, public goods Private goods - allocate until MRS=price ratio Same MRTS (inputs) MRS private for public goods=MRT private for public goods,5,Figure 25.1,Pareto-optimal conditions for a public goods economy,6,The marginal benefit received by each person from consumption of the private good equals the marginal cost of providing the private good,Price,Demand for private good,D (consumer 1),D (consumer 2),(a),x1*,x2*,Price,Demand for public good,D1,D2,(b),q*,The sum of the marginal benefits received by all people from consumption of the public good equals the marginal cost of providing the public good.,1,12,9,21,Societal demand (vertical sum of D1 +D2),Lindahl Solution to Public Goods Problem,Assumption People truthful Preferences for public goods Private goods market No intervention Public goods market Government market aid Cost shares (prices),7,Lindahl Solution to Public Goods Problem,Maximize utility - Equilibrium No change in demand Private goods prices Public goods cost shares Private goods: Supply = Demand Same price, different quantity Public goods same amount demanded Nonexcludable Different price, same quantity,8,Figure 25.2,The Lindahl Solution,9,Private Good,B1,(a),x*,(b),B2,x,Private Consumption path,Person 2,g*,g”,g,h,Cost Share to Person 2,At the Lindahl equilibrium, point D, both agents demand the level of the public good provided (g units), given their assigned cost shares (h for person 1 and 1-h for person 2),Lindahl Solution to Public Goods Problem,Lindahl equilibrium Competitive equilibrium Market: private & public goods Pareto-optimal allocation for society Weakness Incentive people lie Free rider Truth-telling not Nash equilibrium Amount provided Pareto-optimal amount,10,Figure 25.3,The Lindahl equilibrium is not a Nash equilibrium,11,By claiming a false demand curve, CC, instead of her true demand curve, AA, person 1 can reach a point 0* that is better for her than the Lindahl equilibrium point (the intersection of AA and BB).,Cost Share to Person 1,Person 2,h,gh,h0*,ga,g0*,ha,hb,hc,Theoretical Solutions to the Free-Rider Problem,Free riding Real problem to be addressed Optimal sharing - costs of public goods Allocating costs People incentive Truth - public goods preferences,12,The Demand-Revealing Mechanism,Demand-revealing mechanism Creates incentive People reveal public goods preferences Truthful manner Optimal plan Maximize difference Willing to pay Cost Weakness: subsidies,13,Table 25.1,A demand-revealing mechanism based on a true willingness to pay for streetlights,14,The Auction Election Mechanism,N people Vi(X) value of X units public good Vi(0)=0 Each person bid (bi, Xi) Cost share (q-Bi)X; Bi=jibj; X= Xk/N Each person reject or agree cost share If all agree: X, cost share (q-Bi)X If no agreement, X=0, payoff Vi(0),15,Table 25.2,Subject valuations of three public goods projects in Smiths experiments,16,The Auction Election Mechanism,Telling the truth Not dominant strategy Nash equilibrium strategy Auction election mechanism Group level satisfactory Individual level less well,17,Figure 25.4,Smiths auction election experiments,18,Figure 25.4,Smiths auction election experiments (contd),19,The auction election experiments usually result in the rational group choice, but they do not always induce truth-telling.,The Role of Government,Function of government Create institutions mediate conflicts Government mediation People private bargaining Prerequisites for private bargaining Reduce transaction costs Zero-sum game Aggregate: individuals preferences Socially desirable outcome,20,Figure 25.5 (a),Average percentage of endowment contributed to public good due to the negative frame contributions,21,Figure 25.5 (b),Percentage free riding: the positive frame has fewer people free riding,22,The Problem of Preference Aggregation: Arrows Impossibility Theorem,Government Aggregate - preferences of individuals Decision affect welfare Rational social choices Reflect true preferences Complete Transitive,23,The Voting Paradox,Voting institution Majority voting rule Voting paradox If all people in society Transitive preferences Preference of society as a whole Not transitive Problem for society,24,Table 25.3,A preference matrix for a three-person society,25,Conditions for Ideal Voting Mechanism,Group Rationality Social preferences Complete and transitive ordering Set of alternatives Unrestricted Domain Every ordering - individual preferences Complete and transitive (rational) Allowed,26,Conditions for Ideal Voting Mechanism,Pareto Optimality If x preferred to y Then, x - referred to y in social ranking Independence Social ranking of x and y Individuals preferences between x and y Nondictatorship Not allowed: One powerful individual Voting mechanism - own preferences,27,Voting Mechanisms & Ideal Conditions,Arrows impossibility theorem Voting mechanism Determines transitive social preferences Satisfies five conditions Desirable voting mechanism Doesnt exist Transitive social preferences attained Abandon desire for democracy,28,Voting Mechanisms & Ideal Conditions,Simple majority voting rule Transitive social preferences Restrictions on preferences (condition 2) Single-peaked preferences Voting: one-dimensional issues Preferences - single peaked Uniquely best alternative preferred Preferences decline Increasing distance: best alternative,29,Figure 25.6,Single-peaked preferences,30,For each person, alternatives become steadily worse as they get further and further away, in either direction, from the preferred alternative,Utility,Person 1,Person 2,Person 3,Person 4,The Problem of Vote Manipulation,Agenda manipulation Individual controls committees agenda Manipulates: order - pairs of alternatives Influence the outcome Levine-Plott experiment Majority voting rule Intransitive Used by leader To skew voting,31,Table 25.4,A preference matrix for a three-person committee,32,Figure 25.7,Agenda: Levine-Plott agenda manipulation experiment,33,The Problem of Vote Manipulation,Strategic voting Doesnt reflect true preferences Affect votes outcome Strategy: tell truth Not Nash equilibrium strategy,34,Figure 25.8,Decision tree: player who engages in strategic voting,35,By lying in the first round of voting, person 1 can ensure that y, his second choice, is elected over z, his third choice, in the second round of voting.,The Problem of Vote Manipulation,Borda count method Choose: k alternatives Allocation of votes First alternative: k votes Second alternative: k-1 votes Alternative chosen - number total votes Strategy: lie - Nash equilibrium Borda count method Can be manipulated,36,Table 25.5,A preference matrix for a five-person committee,37,The Problem of Vote Manipulation,Gibbard-Satterthwaite theorem Single outcome Chosen from two alternatives Only voting rule - cannot be manipulated Dictatorial voting rule,38,The Government: Institutional Architect,Gibbard-Satterthwaite theorem Problem government Any mechanism Manipulated Undesirable outcomes Solution Mechanisms with Nash equilibria Satisfactory outcomes,39,Figure 25.9,The design of institutions,40,Because the government does not have full knowledge of the environment, it cannot construct the performance correspondence indicating which outcomes are desirable for that environment. Instead, the government attempts to specify a voting mechanism such that the citizens will choose the same outcomes that the government would if it had full knowledge of the env