HW 1 (+7) Models and Welfare

1. (+2) There are four possible policy outcomes, 𝑤, 𝑥, 𝑦, and 𝑧, which give the
following utilities to Abe, Betty, and Cindy, respectively. Tell whether each is
Pareto efficient or not.
[𝑢𝐴 (𝑤), 𝑢𝐵 (𝑤), 𝑢𝐶 (𝑤)] = [100,100,100]
[𝑢𝐴 (𝑥), 𝑢𝐵 (𝑥), 𝑢𝐶 (𝑥)] = [30,100,0]
[𝑢𝐴 (𝑦), 𝑢𝐵 (𝑦), 𝑢𝐶 (𝑦)] = [100,0,101]
[𝑢𝐴 (𝑧), 𝑢𝐵 (𝑧), 𝑢𝐶 (𝑧)] = [31,101,1]

2. (+1) A computerized carnival game chooses a real number 𝑋 ∈ [0,5] at

1
random from a uniform distribution (i.e., with density function 𝑓(𝑥) = 5), and

pays the player of the game 𝑋 2 dollars. If utility 𝑢(𝑋) = 𝑋 is linear in prize
money, what is the expected utility 𝐸[𝑢(𝑋)] associated with this game?

3. (+3) Three friends, Alice, Bart, and Chris, agree to eat lunch together at a
restaurant. There are three restaurants available for lunch: a diner (𝑑), an ethnic
restaurant (𝑒), and a fast-food place (𝑓). Taking prices into account, individual
preferences over the three restaurant options are given by the following utility
functions:

𝑢𝐴 (𝑑) = 5 𝑢𝐵 (𝑑) = 5 𝑢𝐶 (𝑑) = 6

𝑢𝐴 (𝑒) = 6 𝑢𝐵 (𝑒) = 10 𝑢𝐶 (𝑒) = −2
𝑢𝐴 (𝑓) = 4 𝑢𝐵 (𝑓) = 3 𝑢𝐶 (𝑓) = 3

Rank the three restaurants as completely as possible, according to each of the

following social welfare criteria. If only a partial ranking is possible, so indicate:
 a. Paretian
b. Utilitarian
c. Rawlsian

4. (+1) How would you, personally, define a “good” or “bad” policy or good
outcome? Which of the social welfare functions that we discussed in class is
closest to your personal definition? (Note: if you submit homework as a group,
each should answer this question individually.)

HW 2 (+13) Game theory

1. (+3) For the following game, answer the following.

Left Center Right

Up (0,0) (5,3) (3,6)
Down (4,6) (1,2) (4,3)

a. (+2) Identify all pure-strategy Nash equilibria, or state that no such

equilibrium exists.
b. (+1) Is this game zero-sum? Why or why not?

2. (+6) A dictator possesses nuclear weapons, and has threatened to use them
unless the UN satisfies its demands. In that case, other countries may retaliate
or not. If the UN satisfies the dictator’s demands, the payoffs (𝑢𝑈𝑁 , 𝑢𝐷 ) are
(−20,20). If the UN does not satisfy the dictator’s demands, the dictator could
decide not to use its nuclear weapons, in which case payoffs are (0,0). If the
dictator uses nuclear weapons and the UN does not retaliate, payoffs are
(−100, −1). If they do retaliate, payoffs are (−120, −500).
 a. (+3) Identify all pure-strategy Nash equilibria of this game, or state
that no such equilibrium exists. (Remember, an equilibrium is a list of
contingent strategies for each player. That is, the dictator must decide
whether to nuke or not in the event that the UN does not satisfy. Also, if
the UN does not satisfy then it must decide whether to retaliate or not in
the event that the dictator nukes.)
b. (+2) Tell which of the above equilibria (if any) are sub-game perfect.
c. (+1) On the basis of this analysis, what should the UN do? Why?

3. (+4) Shepsle and Bonchek (1997, p. 148) write,

Some political observers have taken the infrequency with which presidents have
used the veto as an indicator of cooperation between the legislative and
executive branches. In this view, infrequent use of the veto corresponds to a
high degree of harmony between the branches. In his 1994 State of the Union
speech, President Bill Clinton proudly announced the end of gridlock and the
beginning of a new period of interbranch harmony by pointing to the fact that
not once had he vetoed a piece of congressional legislation during 1993.

Those authors then argue in favor of an alternative view, which is that Congress
amends its laws to the point that they know it will not be vetoed. Write down a
game such that, in equilibrium, Congress amends a bill and vetoes do not occur.
To be fully specified, such a game should include strategies for both Congress
and the President and outcome utilities for every combination of strategies. (If
the game is sequential, a strategy must specify a player’s behavior plan for the
entire game, possibly including multiple decision nodes). Identify equilibrium
strategies, and demonstrate that neither Congress nor the President has an
incentive to deviate to a different strategy.
HW 3 (+11) Role of Government

1. (+2) Find a passage of scripture from the LDS Standard Works or a quote from
a (present or past) LDS General Authority or famous public figure (past or
present) that relates to the proper role of government. Relate the content of the
passage or quote to notions that we have discussed in class, such as externalities
or public goods. (Note: if you submit homework as a group, each should answer
this question individually.)

2. (+4) This question simply illustrates two ways in which wealth transfers can
increase total utility. In a certain society, individuals are either rich (i.e. wealth
𝑤 = 500) or poor (i.e. 𝑤 = 100). However, the government transfers 𝑡 from the
rich to the poor. After this redistribution, the utility (to any individual) of
consumption 𝑐 is given by 𝑢(𝑐) = √𝑐.
a. (+2) Suppose that individuals are all altruistic, in the sense that they
each seek not to maximize 𝑢 , but to maximize the total welfare 𝑊 =
500√500 − 𝑡 + 500√100 + 𝑡 of the 1000 members of society. What
level 𝑡𝑜 of transfer does each prefer in that case? How high is utility in that
case for rich and poor individuals?
b. (+2) Suppose that life is sufficiently uncertain, one year to the next, that
each individual perceives an equal probability of being rich or poor next
year. In that case, what level 𝑡∗ of transfer would maximize expected
utility 𝐸[𝑢(𝑤; 𝑡)] = .5√500 − 𝑡 + .5√100 + 𝑡 ? How high is expected
utility in that case?

3. (+5) Consider an apartment with three roommates, Abe (𝐴), Ben (𝐵), and
Chris (𝐶), who can play loud music or not. Abe and Ben like loud music, but Chris
hates it; if music is played, the three utilities are 10, 4, and -12 (respectively), and
otherwise each receives zero utility. Like many roommates, the three hardly see
 each other; if one wishes to bargain with another over anything, he must pay a
cost of 4, reflecting the need to coordinate schedules. If he wishes to hold a
meeting with both of his roommates, he must pay a coordination cost of 8. For
each scenario below, tell whether music plays or not, and who bribes whom, for
how much. (There will typically be a range of possible bribes, if any, rather than
a specific bribe amount).

a. (+1) Abe owns the “right” to listen to music (or not).

b. (+1) Ben owns the “right” to listen to music (or not).
c. (+1) Chris owns the “right” to listen to music (or not).
d. (+2) How (if at all) would your answers to parts (a) through (c) change
if coordination with roommates were not costly?

HW 4 (+6) Public Goods

1. (+6) There are 𝑛 members of a community. Each has an endowment 𝑦 of

wealth, which can be spent on a public good 𝑔𝑖 , or a private good 𝑥𝑖 = 𝑦 − 𝑔𝑖 , at
the same price 𝑝𝑥 = 𝑝𝐺 = 1. Utility is then given by 𝑢(𝑥𝑖 , 𝐺) = 𝑥𝑖 𝐺, where 𝐺 =
∑𝑛𝑗=1 𝑔𝑗 is the total amount of public good produced by the community.

a. (+3) If all other citizens produce some level 𝑔𝑗 = 𝑔 of public good,

what will an individual want to produce in response? Find a level 𝑔∗ of
public good such that, if all others produce 𝑔∗ , an individual wishes to
produce the same amount 𝑔∗ in response. For 𝐺 ∗ = 𝑛𝑔∗ , what level
𝑊 ∗ = ∑𝑛𝑖=1 𝑢(𝑥𝑖∗ , 𝐺 ∗ ) of (utilitarian) social welfare is obtained in that
case?
 b. (+2) Now suppose that production decisions are governed by a social
planner, who seeks to maximize total social welfare 𝑊 𝑜 =
∑𝑛𝑖=1 𝑢(𝑥𝑖𝑜 , 𝑛𝑔𝑜 ), by instructing each citizen to contribute (the same
number) 𝑔𝑜 units of public good, and consume any remaining wealth
𝑥𝑖𝑜 = 𝑦 − 𝑔𝑜 . Find 𝑔𝑜 . What level 𝑊 𝑜 of social welfare is obtained in
that case?
c. (+1) Your answers above may depend on the population size 𝑛. Find
𝑊 ∗ (𝑛)
and interpret lim to determine how welfare differs in centralized
𝑛→∞ 𝑊 𝑜 (𝑛)

and decentralized systems as the community grows large.

HW 5 (+14) Tiebout sorting and Pressure groups

1. (+6) The purpose of this exercise is to develop an intuition for the meaning of
Tiebout’s assumption that the optimal club size is small. Suppose that
individuals benefit from consuming both a private good 𝑥 and a club good 𝑔.
However, the value of the club good diminishes quadratically with the number of
other consumers (because of crowding); let an individual club member’s utility
be given by the following:
𝑔
𝑢(𝑥, 𝑔, 𝑛) = 𝑥 ( )
𝑛2
Each individual has wealth 𝑤 with which to purchase 𝑥 and 𝑔 (at prices 𝑝𝑥 =
𝑝𝑔 = 1) but 𝑔 can only be produced at all if a fixed cost 𝐹 is paid. If individuals
form a club to produce 𝑔, they cannot exclude club-members from consuming 𝑔,
but can exclude non-club members. Since all individuals are identical, each pays
𝐹+𝑔
the same club membership fee 𝑡 = if they belong to the club, and spend the
𝑛

rest of their wealth on 𝑥. Let 𝑛∗ denote the number of club members and 𝑔∗
denote the public good quantity that an individual prefers. Since individuals are
identical, they unanimously prefer this club size and club good production level.
 a. (+1) Intuitively, how should the optimal number 𝑛∗ of club
members that an individual wants in his or her club change if the
fixed cost 𝐹 of club good production increases?
b. (+4) Now find 𝑛∗ and 𝑔∗ explicitly in terms of 𝑤 and 𝐹. (Hint:
substitute the budget constraints into the objective function to
eliminate 𝑡 and 𝑥.)
c. (+1) How do 𝑛∗ and 𝑔∗ change with 𝐹? Does this match your
conjecture above?

2. (+8) Abe has 1 unit of wealth and Beatrice has 0, but a policy maker is
considering a transfer 𝑡 of wealth from Abe to Beatrice. The size of the transfer
𝑝𝐵
𝑡=𝑝 will depend on the pressure 𝑝𝐴 and 𝑝𝐵 that Abe and Beatrice generate.
𝐴 𝑝𝐵

Objective functions for Abe and Beatrice can therefore be written as follows,

𝑢𝐴 = √1 − 𝑡 − 𝑝𝐴
𝑢𝐵 = √𝑡 − 𝑝𝐵
where the square root reflects a decreasing marginal benefit of wealth, and the
negative terms −𝑝𝐴 and −𝑝𝐵 reflect the cost of pressuring the policy maker.
a. (+2) Derive the first-order condition for the level of pressure that Abe
will optimally exert on the policy maker, taking Beatrice’s pressure as
given, as well as the first-order condition for the level of pressure that
Beatrice will optimally exert on the policy maker, taking Abe’s pressure as
given.
b. (+2) The symmetry of the first-order conditions is such that any pair
(𝑝𝐴 , 𝑝𝐵 ) of pressure levels that satisfies both first-order conditions must
also satisfy 𝑝𝐴∗ = 𝑝𝐵∗ = 𝑝∗ . Use this fact to determine the level of
pressure that both individuals exert in equilibrium. Also, determine the
size 𝑡(𝑝𝐴∗ , 𝑝𝐵∗ ) of the resulting transfer.
c. (+2) Now suppose that the policy maker ignores pressure from Abe
and Beatrice, and chooses the level of transfers 𝑡 to maximize utilitarian
 social welfare 𝑊 = 𝑢𝐴 + 𝑢𝐵 . What transfer policy is implemented in that
case? How much pressure do Abe and Beatrice then exert?
d. (+2) Use your answers above to discuss the welfare implications of
setting policy in response to political pressure.

HW 6 (+5) Preference Aggregation

1. (+5) To illustrate the Rae-Taylor theorem, consider an electorate consisting of

Alexandria, Beverly, and Cindy. Preferences are statistically independent, and
each is equally likely to support (S) or oppose (O) a future bill, which may pass (P)
or fail (F).
a. Rae and Taylor assume that gains and losses are symmetric, so that utility
is simply 𝑢(𝑃|𝑆) = 𝑢(𝐹|𝑂) = 1 and 𝑢(𝑃|𝑂) = 𝑢(𝐹|𝑆) = −1. In this
case, What is Alexandria’s expected utility, under unanimity rule (i.e. the
bill fails unless everyone supports it) and under majority rule (i.e. the bill
fails unless two voters support it)? Which system does Alexandria
prefer?

b. Now suppose that voters really dislike passing a bill that they oppose, so
that 𝑢(𝑃|𝑂) = −5 (other utilities remain unchanged). Now what is
Alexandria’s expected utility, under unanimity rule and under majority
rule? Which system does Alexandria prefer?

HW 7 (+7) Information Aggregation

1. (+2) A coin is weighted so that it lands on “heads” 75% of the time. The coin
is flipped twice, with the same outcome each time. Given that the outcome is
the same on both flips, how likely is it that the outcome was “heads” both times?
 2. (+5) Ann, Bonnie, and Cindy must together choose between alternative 𝑥 and
alternative 𝑦, which are equally likely to be superior. Individually, each has
probability 𝑞 = .7 of determining which alternative is truly superior, and their
three opinions are statistically independent.
a. (+2.5) What is the probability with which two or more of them correctly
identify the superior alternative?

b. (+2.5) Revise your answer to part a, assuming now that Cindy is biased,
and votes for 𝑥 regardless of which alternative she believes is superior.

HW 8 (+6) Voter Participation

1. (+1) In your opinion, what is the most likely motivation for voter participation
in large elections, and why?
2. (+5) After answering the first part of the question, interview someone you
know who votes in large elections. How does the language of this person’s
stated reasons for voting compare with the various motivations formalized in
class? Is it consistent with the motivation you had predicted? (Note: if you
submit homework as a group, each should answer this question individually.)

HW 9 (+5) Strategic Abstention

1. (+5) Avery, Betty, Christina, Danielle, and Evelyn form a study group, and are
trying to correctly answer a true/false question that is equally likely to be true or
false. Before meeting, each tries independently to answer the question. Avery,
Betty, and Christina are familiar with the material, and each has probability 𝑞𝐻 =
.8 of getting the answer right. Danielle and Evelyn are less familiar with the
material, and each has probability 𝑞𝐿 = .6 of getting the answer right. Which is
 more likely to be right, the majority opinion of Avery, Betty, and Christina, or the
majority opinion of all five? (Hint #1: it suffices to restrict attention to situations
in which the committee of three and the committee of five come to opposite
conclusions. Hint #2: depending on how you solve the problem, it might be
3!
useful to recall that there are 𝐶23 = 2!1! = 3 ways for a three-person vote to split

2-against-1.) Does your answer change if 𝑞𝐿 = .7?

HW 10 (+6) Majority Cycles

1. (+6) Adam, Betty, and Carl receive the following utilities from policies 𝑥, 𝑦,
and 𝑧:
𝑥 𝑦 𝑧
𝑢𝐴 5 3 0
𝑢𝐵 2 0 4
𝑢𝐶 1 6 2

a. (+1) If Adam, Betty, and Carl choose between policies 𝑋, 𝑌, and 𝑍 by

simple majority rule voting, demonstrate that a cycle exists, assuming
that all three vote sincerely.
b. (+1) In order to achieve stability, Adam, Betty, and Carl agree to vote
between only two issues at a time. Assuming that they each vote
sincerely in both elections, what will be the outcome under each of the
following agendas?
i. The first round is between 𝑋 and 𝑌, and the second round is 𝑍
against the winner of the first round.
ii. The first round is between 𝑋 and 𝑍, and the second round is 𝑌
against the winner of the first round.
iii. The first round is between 𝑌 and 𝑍, and the second round is 𝑋
against the winner of the first round.
 c. (+2) Revise your answers to question b under the assumption that all
three citizens vote strategically (but can’t collude).
d. (+2) Suppose that Adam is the agenda setter, and can choose which
order to hold the elections in. What will he choose, and what will be the
ultimate policy outcome, under the following conditions?
i. Adam knows that Betty and Carl each vote sincerely.
ii. Adam knows that Betty and Carl each vote strategically (but can’t
collude).

HW 11 (+12) Voting Rules 1

1. (+2) Of the following rules, which do you personally find most appealing, and
why? (Note: if you submit homework as a group, each should answer this
question individually.)

a. Unanimity rule
b. Plurality rule
c. Negative voting
d. Majority rule with run-off
e. Instant runoff
f. Coombs system
g. Borda count

2. (+10) Seven individuals (𝐴 through 𝐺) must choose between four policy

alternatives (𝑤 through 𝑧). The utilities that each derive from each of the
alternatives are given by the following.

w x y z
A 6 3 1 0
B 0 5 3 2
C 2 1 7 0
D 3 2 1 4
 E 3 2 4 1
F 0 4 1 5
G 1 0 3 6

a. (+1) Does a Condorcet winner exist? Justify your answer.

b. (+1) Which alternative is optimal from a utilitarian perspective? Why?
c. (+1) Which is optimal from a Rawlsian perspective? Why?
d. (+5) Assume that individuals vote sincerely. For each of the seven
voting rules listed in question 1 identify which alternative(s) will be
chosen, or state that the rule is indeterminate for this electorate. To
accommodate ties, you may augment the basic procedures, but state
clearly any such adjustments.

e. (+1) On the basis of this analysis, what policy do you think ought to be
implemented, and why? Is this the recommendation of the rule that you
endorsed in question 1?
f. (+1) Use your analysis from part (d) to illustrate one example of an
incentive to vote strategically, instead of sincerely.

HW 12 (+5) Voting Rules 2

1. (+2) Of the following rules, which do you personally find most appealing, and
why? (Note: if you submit homework as a group, each should answer this
question individually.)

a. Kemeny rule
b. Approval voting
c. Market for votes
d. Score voting
e. Quadratic voting
 2. (+3) Seven individuals (𝐴 through 𝐺) must choose between four policy
alternatives (𝑤 through 𝑧). The utilities that each derive from each of the
alternatives are given by the following.

w x y z
A 6 3 1 0
B 0 5 3 2
C 2 1 7 0
D 3 2 1 4
E 3 2 4 1
F 0 4 1 5
G 1 0 3 6

Assume that individuals vote sincerely. If the Kemeny method is used, which
alternative will be chosen?

HW 13 (+10) Impossibility Theorem

1. (+3) Does the Borda rule satisfy Arrow’s Unanimity axiom? Does it satisfy
Independence? Justify your answer.
2. (+7) The purpose of this question is to illustrate how electoral outcomes are
less sensitive to the voting rule when voters share an underlying common
interest. Suppose that the true welfare ranking of policies 𝑥, 𝑦, and 𝑧 is 𝑥 ≻ 𝑦 ≻
𝑧, but that votes’ opinions of the welfare ranking may differ from this.
4
Specifically, any voter has a probability 15 of believing that 𝑥 ≻ 𝑦 ≻ 𝑧,
3 2
probabilities 15 each of believing 𝑥 ≻ 𝑧 ≻ 𝑦 or 𝑦 ≻ 𝑥 ≻ 𝑧, probabilities 15 each
1
of believing 𝑦 ≻ 𝑧 ≻ 𝑥 or 𝑧 ≻ 𝑥 ≻ 𝑦, and a probability 15 of believing that 𝑧 ≻

𝑦 ≻ 𝑥. Suppose further that there are three voters, Alice, Betty, and Cedric,
whose opinions are statistically independent of one another.
a. (+4) If the three voters vote sincerely using plurality rule (breaking a
three-way tie, if necessary, with equal probability), how likely are they to
 choose 𝑥? How likely are they to choose 𝑦? How likely are they to
choose 𝑧?

b. (+3) If the voters vote sincerely using the Borda rule, what are the
expected scores for 𝑥, 𝑦, and 𝑧?

3. Suppose that voters 𝐴, 𝐵, and 𝐶 have to choose between alternatives 𝑥, 𝑦, and

𝑧, and that they share a common interest in doing whatever is truly best for the
group, which in reality is 𝑥 ≻ 𝑦 ≻ 𝑧. However, the voters’ private opinions of
what is best need not coincide perfectly with the truth. Suppose that each
believes that has a 60% probability of believing that 𝑥 ≻ 𝑦 and (independently)
a 60% probability of believing that 𝑦 ≻ 𝑧. Each believes that 𝑥 ≻ 𝑧 unless they
make mistakes about both of the relations with 𝑦, in which case

HW 14 (+9) Median Voter Theorem

1. (+2) Alice, Ben, and Carl have policy preferences over 𝑤, 𝑥, 𝑦 and 𝑧 as follows:
𝑤 ≻𝐴 𝑥 ≻𝐴 𝑦 ≻𝐴 𝑧
𝑤 ≻𝐵 𝑦 ≻𝐵 𝑧 ≻𝐵 𝑥
𝑧 ≻𝐶 𝑤 ≻𝐶 𝑦 ≻𝐶 𝑥
If the policies are arranged in alphabetical order, then voter 𝐴 has single-peaked
preferences, but voter 𝐶 does not; is there a way to order the policies 𝑤, 𝑥, 𝑦,
and 𝑧 such that each voters’ preferences listed above are single-peaked? If so,
state the ordering; if not, explain why.

2. (+7) Consider a society inhabited by five citizens, indexed by 𝑖 = 1, 2, 3, 4, 5,

and suppose that the preferences over a public good 𝑔 and private good 𝑐𝑖 are
𝑢𝑖 = 𝑐𝑖 + 𝜃𝑖 √𝑔
 1 1
where 𝜃𝑖 is a taste parameter unique to citizen 𝑖, taking on values 𝜃𝑖 = 𝑖 (i.e., ,
5 5
2 3 4 5
, , , 5). Assume, in addition, that all individuals have two units of wealth
5 5 5

𝑤𝑖 = 2, and the prices of the private and public goods are both equal to one:
𝑝𝑐 = 𝑝𝑔 = 1. To finance the production of the public good, the government
issues a head tax 𝑡 on each individual (i.e. total revenue 𝑔 = 5𝑡) so that agent 𝑖’s
budget constraint is 𝑐𝑖 = 2 − 𝑡.
a. (+3) What tax rate 𝑡 𝑜 maximizes (utilitarian) social welfare 𝑊(𝑡) =
∑5𝑖=1 𝑢𝑖 (𝑡) for this society?
b. (+2) Recall that preferences are single-peaked in the tax rate 𝑡 if, for
any preference parameter 𝜃𝑖 the utility 𝑢𝑖 (𝑡) associated with tax rate 𝑡
first increases up to some preferred tax rate 𝑡𝑖∗ and then decreases
thereafter. Are preferences here single-peaked?
c. (+2) Using the median voter theorem, find a tax rate 𝑡 𝑀 that is
preferred by a majority of voters to any other tax rate. How does 𝑡 𝑀
compare with the social optimum 𝑡 𝑜 ?

HW 15 (+7) Chaos Theorem

1. (+7) Five voters have single-peaked preferences (with circular
indifference curves) over a two-dimensional policy space, with ideal points
(−2,0), (0, −2), (0,0), (2,0), and (0,2).
a. (+3) Show that the policy (0,0) is a Condorcet winner (that is, that is is
majority preferred to any policy in the two-dimensional space, not just
to the five ideal policies).
b. (+3) The status quo is (−1,0), but an agenda setter with ideal point
(0,2) (who has no voting power) proposes a single new policy pair,
which is adopted if preferred by a majority. What should she
propose? (Assume indifferent voters accept the proposal.) What if the
status quo is (0,0)?
 c. (+1) In class, we demonstrated that, when no Condorcet winner
exists, an agenda setter can pit sincere voters against one another to
eventually get her ideal policy. How does this change when a
Condorcet winner exists?

HW16 (+5) Electoral Competition

1. (+3) Candidates Adams and Burr are running for public office. To campaign,
each makes a binding promise 𝑒𝑗 ≥ 0 to voters, regarding the level of effort he
will exert if elected. Voter utility is increasing in the effort exerted by the
winning candidate. That candidate receives a benefit of 100 representing the
perks of office (e.g. fame, influence, salary, etc.), and also bears a cost of 𝑒𝑗2 ,
which increases (increasingly) in the effort he commits to exert. What voter
behavior and what candidate behavior do you predict will occur in equilibrium,
and why?

2. (+2) The pandering model analyzed in class assumed that the representative
voter would learn the true state of the world with probability 𝜌 = .2. Given the
other parameters of the model, this led to utility levels 𝐸𝑢𝐿 (𝑎|𝑠𝛽 ) =
[(. 39)(100)] + .9[(. 39)(1) + (. 61)(. 8)][(. 7)(100)] ≈ 94 and 𝐸𝑢𝐿 (𝑏|𝑠𝛽 ) =
[(. 61)(100)] + .9[(. 39)(0) + (. 61)(. 2)][(. 7)(100)] ≈ 69, which in turn
generated the conclusion that the incumbent would pander to the voter’s prior
beliefs. For what values of 𝜌 would this conclusion still be appropriate, and for
what values of 𝜌 would a sincere strategy by the incumbent be consistent with
equilibrium? Does pandering require a sufficiently high value of 𝜌, or a
sufficiently low value of 𝜌? Give a logical intuition for this result.
HW 17 (+4) Downsian Model

1. (+4) Downs’ (1957) model of electoral competition assumes that candidates

care only about winning the election. One reason for this is the conjecture that
such a candidate has a competitive advantage over opponents with other
motivations. To evaluate this possibility, consider an electoral contest over a
one-dimensional policy space [−1,1] between candidate A, who desires only to
win an election, and candidate B, who cares only about the policy outcome.
Specifically, B’s policy preferences are single-peaked, with an ideal point at 0.9.
Either candidate may adopt any policy platform in the policy space, but must
implement that policy if she wins office. Suppose that there are 21 voters,
whose preferences are single-peaked, with ideal points evenly spaced between
−1 and 1 (i.e. located at −1.0, −0.9, −0.8, … ,0.8,0.9, and 1.0), and that each
votes for the candidate whose policy platform is closer to his/her ideal point
(flipping a coin if they are equidistant).

The candidates must announce their platform positions simultaneously.

An equilibrium in this context consists of a pair (𝑥𝐴 , 𝑥𝐵 ) of policy platforms such
that, given the position of the other candidate, neither candidate regrets her
own platform choice. Answer the following, and explain your reasoning.

a. Does (0,0) constitute an equilibrium?

b. Are there any equilibria in which candidate 𝐵 receives a higher vote share
than candidate 𝐴?

c. Are there any equilibria in which 0.9 is the policy outcome?

d. Identify one pair of equilibrium platforms other than any that have been
noted above, or state that none exists and explain your reasoning.
HW 18 (+0) Downsian Extensions

HW 19 (+10) Multiple Dimensions

1. (+3) Consider spatial voting over a two-dimensional issue by five citizens, A, B,

C, D, and E, who have single-peaked preferences (with circular indifference
curves), with ideal policy bundles (-2,0), (-1,0), (0,1), (1,0), and (2,0), respectively.
The utility 𝑢𝑖 = −𝑑2 from policy pair (𝑥1 , 𝑥2 ) to a voter with ideal point (𝑦1 , 𝑦2 )

decreases in the distance 𝑑 = √(𝑥1 − 𝑦1 )2 + (𝑥2 − 𝑦2 )2 between (𝑥1 , 𝑥2 ) and

(𝑦1 , 𝑦2 ). These citizens must vote for candidate 𝑅 or candidate 𝑆, who are office
motivated and who each commit to platforms consisting of one policy in each
dimension.
a. (+1) Do 𝑥𝑅 = (0,0) and 𝑥𝑆 = (0,0) together constitute an equilibrium?
Why or why not?
b. (+2) Now assume that candidate R has a valence advantage of 1 over
candidate S. If candidate R adopted the policy bundle 𝑥𝑅 = (0,0), is R
guaranteed to win the election? Or is there some policy bundle 𝑆 can
adopt in response, and win? What if R adopts the policy bundle 𝑥𝑅 =
(0,1)? Explain your answer.

2. (+7) Consider a probabilistic voting model with three citizens, who possess
wealth 𝑤1 = 0, 𝑤2 = 2, and 𝑤3 = 10. The preferences of agent 𝑖 over a public
good 𝑔 and a private good 𝑥𝑖 are
𝑢𝑖 = 𝑥𝑖 + √𝑔
where the public good 𝑔 = (0𝑡 + 2𝑡 + 10𝑡) = 12𝑡 must be financed by a tax 𝑡 ∈
[0,1] on wealth, leaving each individual with private consumption 𝑥𝑖 = 𝑤𝑖 (1 −
𝑡).
a. (+2) What tax rates 𝑡𝑖∗ do each of the three individuals prefer?
 b. (+2) If a (utilitarian) social planner were to choose a tax rate 𝑡 ∗ to
maximize welfare 𝑊(𝑡) = ∑3𝑖=1 𝑢𝑖 (𝑡), what tax rate would the planner
choose?
Now suppose that candidates 𝐴 and 𝐵 have proposed to implement tax rates 𝑡𝐴
and 𝑡𝐵 , respectively. A citizen who is unbiased would vote for candidate 𝐴 if
𝑢𝑖 (𝑡𝐴 ) > 𝑢𝑖 (𝑡𝐵 ), and vote for candidate 𝐵 otherwise. However, each citizen has
an additive bias 𝛽𝑖 in favor of candidate 𝐵 (where 𝛽𝑖 may be negative, implying
that 𝑖 actually has a bias in favor of candidate 𝐴), for reasons unrelated to tax
policy. Candidates observe voters’ tax preferences, but cannot observe voters’
biases.
From a candidate’s perspective, each citizen’s bias is drawn
independently from a uniform distribution on the interval [−1,1]. The cdf of a
𝑏+1
uniform distribution can be written as 𝐹(𝑏) = Pr⁡(𝛽𝑖 < 𝑏) = , so the
2

probability with which a citizen votes 𝐴 can be written as 𝑝𝑖 (𝐴) = Pr[𝑢𝑖 (𝑡𝐴 ) >
𝑢𝑖 (𝑡𝐴 )−𝑢𝑖 (𝑡𝐵 )+1
𝑢𝑖 (𝑡𝐵 ) + 𝛽𝑖 ] = Pr[𝛽𝑖 < 𝑢𝑖 (𝑡𝐴 ) − 𝑢𝑖 (𝑡𝐵 )] = 𝐹[𝑢𝑖 (𝑡𝐴 ) − 𝑢𝑖 (𝑡𝐵 )] = .
2

Let 𝑉𝑖𝐴 denote a binary random variable that equals one if 𝑖 votes for
candidate 𝐴 and zero otherwise, and let 𝑉𝐴 = ∑3𝑖=1 𝑉𝑖𝐴 denote the total number
of votes for candidate 𝐴. The expected number of votes for 𝐴 is then given by
𝐸(𝑉𝐴 ) = ∑3𝑖=1 𝐸(𝑉𝑖𝐴 ) = ∑3𝑖=1 𝑝𝑖 (𝐴). The expected number 𝐸(𝑉𝐵 ) of votes for 𝐵
can be defined analogously.
c. (+2) Implicitly, 𝐸(𝑉𝐴 ) and 𝐸(𝑉𝐵 ) depend on the tax rates 𝑡𝐴 and 𝑡𝐵
proposed by the two candidates. Suppose that candidate 𝐴 treats 𝑡𝐵 as
given, and chooses 𝑡𝐴 to maximize 𝐸(𝑉𝐴 ). What tax rate 𝑡𝐴∗ should 𝐴
adopt?
d. (+1) Suppose that 𝑡𝐵∗ is determined analogously, and compare 𝑡𝐴∗ and
𝑡𝐵∗ with the three voters’ preferred tax rates 𝑡1∗ , 𝑡2∗ , and 𝑡3∗ , and the
planner’s preferred tax rate 𝑡 ∗ .
HW 20 (+6) Entry

1. (+6) Consider the following spatial model of candidate entry. First, parties A
and B commit to policy positions in the interval [-1,1], where voter ideal points
are distributed uniformly over this interval (i.e., and the median voter’s ideal
point is therefore at 0). After these “frontrunner” parties have committed to
policy positions, party C has the option of either staying out of the race or paying
a cost 𝑐 > 0 to enter at any position. Citizens then each vote sincerely for the
candidate (of those in the race) whose platform they prefer. None of the
candidates have policy preferences; each merely wants the benefit 𝑏 of winning
1
office (where you may assume that 3 𝑏 > 𝑐).

a. (+4) Consider first the behavior of candidate C, in the subgame after

candidates A and B have already taken positions 𝑥𝐴 ≤ 𝑥𝐵 . For what
platform pairs should C enter the race, and which policy should C adopt
in these cases (if any)?
b. (+2) If the front-runner candidates A and B expect candidate C to
behave as you have predicted above, tell what types of policy pairs
(𝑥𝐴 , 𝑥𝐵 ) these candidates might adopt in a (subgame-perfect, pure-
strategy) equilibrium, or explain why no such equilibrium exists.

HW 21 (+7) Ideology as Opinion

1. (+7) Let 𝑧 ∈ {−1,1} denote a policy that is optimal for society, and assume
that voters share a common interest in implementing a policy as close as
possible to 𝑧. Specifically, if policy 𝑥 ∈ [−1,1] is implemented then voter utility
𝑢(𝑥, 𝑧) = −(𝑥 − 𝑧)2 is determined by the quadratic distance between 𝑥 and 𝑧.
 a. (+2) If 𝑧 is modeled as a random variable, show that the policy 𝑥 ∗ ∈
[−1,1] that maximizes expected utility 𝐸𝑧 [𝑢(𝑥, 𝑧)] = 𝐸𝑧 [−(𝑥 − 𝑧)2 ] is
given simply by the expectation 𝐸𝑧 (𝑧).

b. (+1) Now suppose that a citizen observes a signal 𝑠𝑖 ∈ {−1,1} that is

1
correlated with 𝑧. Specifically, the probability that 𝑠𝑖 = 𝑧 is 2 (1 + 𝑞𝑖 ),

where 𝑞𝑖 > 0 is the correlation coefficient between 𝑠𝑖 and 𝑧. By Bayes’

rule, the updated distribution of 𝑧 can then be derived as 𝑃(𝑧|𝑞𝑖 , 𝑠𝑖 ) =
1
(1 + 𝑞𝑖 𝑠𝑖 𝑧) for any 𝑠𝑖 , 𝑧 ∈ {−1,1}.1 Given this information, derive the
2

policy 𝑥𝑖∗ = 𝐸𝑧 (𝑧|𝑞𝑖 , 𝑠𝑖 ) that is optimal in expectation, as a function of 𝑞𝑖

and 𝑠𝑖 .
c. (+2) Use your answers above to explain how this model relates to the
empirical observation that voters who lack confidence in their opinions
tend to remain ideologically moderate.

d. (+2) The model above can be altered such that the optimal policy 𝑧 ∈
[−1,1] is a continuous random variable, distributed uniformly over the
1
entire policy continuum (i.e., with density 𝑓(𝑧) = 2 over that domain),

meaning that any policy between −1 and 1 might be optimal, and such
that 𝑠𝑖 ∈ [−1,1] is continuous as well, with conditional density given by
1
𝑓(𝑠𝑖 |𝑞𝑖 , 𝑧) = 2 (1 + 𝑞𝑖 𝑠𝑖 𝑧) for any 𝑞𝑖 ∈ [0,1] and any 𝑠𝑖 , 𝑧 ∈ [−1,1]. By

Bayes’ rule, it can then be shown that the posterior density of 𝑧 is

1
𝑓(𝑧|𝑞𝑖 , 𝑠𝑖 ) = 2 (1 + 𝑞𝑖 𝑠𝑖 𝑧)⁡for⁡any⁡𝑞𝑖 ∈ [0,1]⁡and⁡any⁡𝑠𝑖 , 𝑧 ∈ [−1,1].

Given this information, derive the policy 𝑥𝑖∗ = 𝐸𝑧 (𝑧|𝑞𝑖 , 𝑠𝑖 ) that is optimal
from a voter’s perspective.

1 1
𝑃(𝑠𝑖 |𝑞𝑖 , 𝑧)𝑃(𝑧) 2
(1+𝑞𝑖 𝑠𝑖 𝑧)⋅
2 1
1
To see this, note that 𝑃(𝑧|𝑞𝑖 , 𝑠𝑖 ) = ∑ =1 1 1 1 = (1 + 𝑞𝑖 𝑠𝑖 𝑧).
𝑠 𝑞 , 𝑧)𝑃(𝑧)
𝑧=−1,1 𝑃( 𝑖 | 𝑖 2
(1−𝑞𝑖 𝑠𝑖 )⋅ + (1+𝑞𝑖 𝑠𝑖 )⋅
2 2 2
2
HW 22 (+8) Polarization and Pandering

1. A policy 𝑥 must be chosen from the interval [−1,1]. There is one representative
voter, whose preference is to implement a policy as close as possible to his
expectation 𝑧̂ of what is socially optimal. There are two candidates: an
incumbent 𝐼 has committed to implement policy 𝑥𝐼 = −1 if reelected. A
challenger 𝐶 is free to propose any alternative policy 𝑥𝐶 . The challenger
perceives that the voter is equally likely to favor any policy in the policy space.
That is, 𝑧̂ is distributed uniformly on [−1,1].
a. (+3) As a function of the challenger’s policy choice 𝑥, what are the
probabilities Pr(𝐼) and Pr(𝐶) with which the incumbent and the
challenger, respectively, will win the election?

Now suppose that the challenger prefers that the policy outcome be as close as
possible to 1. Specifically, she has the utility function 𝑢(𝑥) = −(1 − 𝑥)2 .
Expected utility depends on the probabilities with which each candidate wins,
and on the platforms of both candidates, as follows:
𝐸[𝑢(𝑥𝐶 )] = Pr(𝐼) 𝑢(𝑥𝐼 ) + Pr(𝐶) 𝑢(𝑥𝐶 )

b. (+3) What is the optimal policy choice 𝑥𝐶∗ for the challenger?

Now suppose that the challenger also values winning the election. Specifically,
expected utility is given by the following,
𝐸[𝑢(𝑥𝑐 )] = Pr(𝐼) 𝑢(𝑥𝐼 ) + Pr(𝐶) 𝑢(𝑥𝐶 ) + 𝑏𝑃𝑟(𝐶)
where 𝑏 = 1.

c. (+2) Now what is the optimal policy choice 𝑥𝐶∗ for the challenger?
Intuitively, why is this answer different from that of part b?
HW 23 (+11) Mandates

1. (+8) Consider a binary issue, in which policy 𝐿 = −1 and policy 𝑅 = 1 are

equally likely to be optimal. There are three citizens, and each independently
observes a signal that correctly identifies the optimal policy with probability 𝑞 =
.75. Suppose that each votes in accordance with his or her signal.

a. (+3) What is the probability that the optimal policy gets three votes?
Two votes? One vote? No votes?

b. (+3) If policy R is elected unanimously, what is the conditional

probability that it is the optimal policy? What if R wins by only a single
vote (i.e. 2 to 1)?

c. (+2) Now let 𝑧 ∈ {−1,1} denote the policy that is actually optimal, and
suppose that a winning candidate can fine-tune her policy choice after
observing vote totals, implementing her updated expectation 𝐸(𝑧|𝑙, 𝑟) of
𝑧, conditional on vote totals 𝑙 and 𝑟. What will such an executive
implement if (𝑙, 𝑟) = (0,3) (i.e. all three citizens vote R)? What if (𝑙, 𝑟) =
(1,2)?

2. (+3) Let the joint distribution 𝑃(𝑧1 , 𝑧2 ) of two optimal policies 𝑧1 and 𝑧2 be
given by
𝑧2 = 0 𝑧2 = 1
𝑧1 = 0 3/8 1/8
𝑧1 = 1 1/8 3/8
a. (+1) What is the unconditional probability that 𝑧2 = 1? When 𝑧1 = 1,
what is the conditional probability that 𝑧2 = 1 as well?
 b. (+2) Find the correlation coefficient 𝜌 between 𝑧1 and 𝑧2 . (Hint: recall
𝐶𝑜𝑣(𝑋,𝑌)
that, for random variables 𝑋 and 𝑌, 𝐶𝑜𝑟𝑟(𝑋, 𝑌) = , where
√𝑉(𝑋)√𝑉(𝑌)

𝐶𝑜𝑣(𝑋, 𝑌) = 𝐸(𝑋𝑌) − (𝐸𝑋)(𝐸𝑌) and 𝑉(𝑋) = 𝐸(𝑋 2 ) − (𝐸𝑋)2.)

HW 24 (+0) Multiple Dimensions

HW 25 (+12) Federalism & Parliamentary Systems

1. (+8) Consider a parliamentary election in a country with six political parties,

who compete for 100 seats by adopting platform policies in a one-dimensional
policy space. Citizens’ preferences are single-peaked, and each citizen votes
sincerely for the party whose platform is closest to her ideal policy. The outcome of
this is that parties 𝐴, 𝐵, 𝐶, 𝐷, 𝐸, and 𝐹 receive 26, 7, 14, 19, 12, and 22 seats,
respectively. From this position, parties must form a coalition government.
a. Is there a majority party?
b. Identify all minimum winning coalitions.
c. Identify the minimum winning coalition(s) with the fewest parties.
d. Identify the minimum winning coalition(s) with the fewest seats.
e. Identify all minimum connected winning coalitions.
f. Identify the minimum connected winning coalition(s) with the fewest parties.
g. Identify the party of the median voter.
h. What coalition do you predict will form, and why?
2. (+4) Consider the following variation on the Downsian model: there are a
continuum [0,1] of policy alternatives and a continuum of voters with single-peaked
preferences distributed uniformly across [0,1] , plus two parties, 𝐿 and 𝑅 , with
preferences for left- and right-wing policies, respectively. Specifically, the two parties
have utility 𝑢𝐿 = 1 − 𝑥 and 𝑢𝑅 = 𝑥 , respectively, where 𝑥 ∈ [0,1] is the policy
outcome. The two parties simultaneously adopt policy positions 𝑥𝐿 and 𝑥𝑅 , and each
citizen then votes for whichever party is closest to his own ideal point. That is, a
𝑥𝐿 +𝑥𝑅 𝑥𝐿 +𝑥𝑅
fraction 𝜆𝐿 = ( − 0) vote 𝐿 and a fraction 𝜆𝑅 = (1 − ) vote 𝑅 . The
2 2

resulting policy outcome is a weighted average 𝑥 = 𝜆𝐿 𝑥𝐿 + 𝜆𝑅 𝑥𝑅 of the two parties’

platforms.
a. (+1) Before working things out formally, conjecture what platforms the
parties will adopt in equilibrium. What is the basis for your conjecture? (If
you submit homework as a group, you must each answer this question
individually.)

b. (+2) Now work things out: in equilibrium, what platforms do the

parties adopt?

c. (+1) How does this compare with the predictions of a standard

Downsian model? What is an intuition for why they are the same, or why
they are different?