Scdmttamen

Exam Mastercourse Strategic and Cooperative Decision Making
21 March 2013
Problem 1 (15 credits)

Consider the deficit sharing problem (N, t, x) with N = {1, 2, 3, 4}, t = 20 and x = (4, 7, 10, 14).
a. (3) Find the outcome according to the uniform gains solution.
b. (5) Show that equal treatment of equals and independence on higher claims determine the
outcome according to the uniform gains solution. (In other words, show that a solution that
satisfies equal treatment of equals and independence on higher claims assigns the outcome you
found in a to this deficit sharing problem.)
Now, consider the deficit sharing problem (N, t, x) with N = {1, 2} and x = (10, 14).
c. (4) For which values of t does the uniform gains solution assign equal payos to both agents.
d. (3) For which values of t does the uniform losses solution assign zero payos to agent 1.
Problem 2 (12 credits). Consider a circular road network with four nodes, A, B, C and D.
There is a road from node A to node B with distance 1, from B to C with distance 2, from C to
D with distance 4 and from D to A with distance 4. At each node there lives precisely one agent.
A desirable facility F will be located somewhere on the network. Assume that the utility of an
agent at node j, j = A, B, C, D, is equal to uj = xj , where xj is the shortest distance along the
network from node j to the location of the facility.
a. (4) Give all optimal locations of F according to the Classical Utilitarian collective utility
function.
b. (4) Which location is selected by the Egalitarian collective utility function.
c. (4) Suppose that a new road is added from node A to node C with length 2. Show that the
Leximin social welfare ordering does not satisfy resource monotonicity.
Problem 3 (12 credits). Suppose we have three voters and four alternatives and suppose the
individual preference lists are as follows:
Voter 1 Voter 2 Voter 3
a
c
b
b
a
d
d
b
c
c
d
a
a. (3) What alternative(s) is (are) the Borda winner(s)?

b. (3) Which voters have single-peaked preferences with the order c < d < b < a?
c. (3) Show the following for the given three preference lists: if the social choice procedure being
used is sequential pairwise voting with a fixed agenda, and, if you have agenda setting power (i.e.,
you get to choose the order), then you can arrange for whichever alternative you want to be the
social choice.
d. (3) In general, show that on the class of voting problems with single-peaked preferences the
Condorcet method (sequential pairwise voting) is strategy proof.
Problem 4. (17 credits)

It is known that the Banzhaf value satisfies collusion neutrality, one player eciency, the null
player property, symmetry and linearity.
a. (7) Show that the Banzhaf value is the unique solution that satisfies collusion neutrality, one
player eciency, the null player property, symmetry and linearity.
b. (3) Show that the Shapley value satisfies the null player property.
c. (4) Show that the Shapley value does not satisfy collusion neutrality.
Consider the cooperative TU-game (N, v) with N = {1, 2, 3} and v({1}) = v({2}) = v({3}) =
1, v({1, 2}) = 2, v({1, 3}) = 3, v({2, 3}) = 4 and v({1, 2, 3}) = 7.
d. (3) Compute the Banzhaf value of this game.

Consider a situation in which two items of a good must be allocated over the set N = {1, 2, 3} of
three agents whose valuations are given by V = (V1 , V2 , V3 ) = (5, 20, 16)
a. (4) Find the allocation and compensations according to the Shapley rule.
b. (3) Show that the Shapley rule is not envy-free.
Now, consider a situation in which only one item of a good must be allocated over a set of n
agents N = {1, . . . , n}.
c. (5) Show that the equal division rule is envy-free.

a. (4) In the EU Council of Ministers, a restricted number of policies judged to be sensitive shall
remain subject to unanimity voting.1 Determine the Banzhaf measure, Shapley-Shubik index and
the power of a collectivity to act for this rule.
b. (5) Consider the weighted representation of the Treaty of Nice in Table 1 (see last page of this
document), in particular Group 1 of the 4 largest countries and Group 2 of the 4 smallest countries. Applying Penroses square root rule, explain whether one of the groups is over-represented
in comparison to the other.
c. (4) The Treaty of Nice has often been criticized. Explain why the Lisbon Treaty is considered
as an improvement.
Specifically taxation, social security or social protection, the accession of new States to the European Union,
foreign and common defence policy and operational police cooperation between the Member States.
Consider an assignment problem of three items to be assigned to three agents, A, B, C. Each
object gives a payo to each of the agents, according to the following table.
agent
6
4
8
4
3
6
1
10
11
item
1
2
3
a. (4) Give all ecient assignments of the three items to the three agents.
b. (4) An assignment can be implemented by including cash transfers. Find transfers with sum
equal to zero, that induce an ecient and envy-free assignment of the items.

Consider an international river basin with three countries, indexed by U1 , U2 and D. The river
has two springs, one in country U1 and one in country U2 , and merges to together into one single
stream in country D, i.e., U1 and U2 are two upstream countries, and country D is the single
downstream country. At both upstream countries U1 and U2 there is an inflow of 100 units of
water (so 200 in total), the inflow at the downstream country is zero. The countries have linear
benefit functions, given by bi (xi ) = bi xi , i = U1 , U2 , D with bU1 = bU2 = 0 and bD = 1.
a. (3) Give the corresponding river game.
b. (4) To each country corresponds a hierarchical outcome of the river game. Give the three
hierarchical outcomes.
c. (4) Show that the average hierarchical outcome satisfies the property of Equal Weights TIBS
fairness in this example.
Table 1: Weighted Representation of EU Qualified Majority Rule in Treaty of Nice

Country
Germany
UK
France
Italy
Spain
Poland
Romania
Netherlands
Greece
Czech Rep
Belgium
Hungary
Portugal
Sweden
Bulgaria
Austria
Slovakia
Denmark
Finland
Ireland
Lithuania
Latvia
Slovenia
Estonia
Cyprus
Luxembourg
Malta
Total
w
(%)
(%)
(%)
(%)
82,437,995
60,393,100
62,998,773
58,751,711
43,758,250
38,157,055
21,610,213
16,334,210
11,125,179
10,251,079
10,511,382
10,076,581
10,569,592
9,047,752
7,718,750
8,265,925
5,389,180
5,427,459
5,255,580
4,209,019
3,403,284
2,294,590
2,003,358
1,344,684
766,414
459,500
404,346
118
117
117
117
108
108
56
52
48
48
48
48
48
40
40
40
28
28
28
28
28
16
16
16
16
16
12
8.5199
8.4477
8.4477
8.4477
7.7978
7.7978
4.0433
3.7545
3.4657
3.4657
3.4657
3.4657
3.4657
2.8881
2.8881
2.8881
2.0217
2.0217
2.0217
2.0217
2.0217
1.1552
1.1552
1.1552
1.1552
1.1552
0.8664
2.7356
2.7356
2.7356
2.7356
2.6145
2.6145
1.5166
1.4148
1.3153
1.3153
1.3153
1.3153
1.3153
1.1037
1.1037
1.1037
0.7796
0.7796
0.7796
0.7796
0.7796
0.4469
0.4469
0.4469
0.4469
0.4469
0.3374
7.7145
7.7145
7.7145
7.7145
7.3732
7.3732
4.2771
3.9900
3.7092
3.7092
3.7092
3.7092
3.7092
3.1126
3.1126
3.1126
2.1984
2.1984
2.1984
2.1984
2.1984
1.2603
1.2603
1.2603
1.2603
1.2603
0.9514
8.6799
8.6670
8.6670
8.6670
7.9888
7.9888
3.9925
3.6866
3.3977
3.3977
3.3977
3.3977
3.3977
2.8137
2.8137
2.8137
1.9594
1.9594
1.9594
1.9594
1.9594
1.1209
1.1209
1.1209
1.1209
1.1209
0.8310
492,964,961
1 385
Population
Quota: 1 034 = 74.66% of 1 385.

w: voting weight, w
(%): voting weight in percentage terms
(%): Banzhaf measure in percentage terms, (%): normalized Banzhaf in percentage terms
(%): Shapley-Shubik index in percentage terms
Re Exam Mastercourse Strategic and Cooperative Decision Making

20 March 2014

b. (5) Show that equal treatment of equals and independence on higher claims determine the
outcome according to the uniform gains solution.
c. (4) Show that the uniform gains solution does not satisfy merge invariance.
Now, consider the deficit sharing problem (N, t, x) with N = {1, 2}, t = 8 and x = (5, 9).
d. (3) For which values of t does the Reverse Talmud rule assign payoff 5 to agent 1?

For a society of n agents, let be a complete, transitive, monotone, symmetric and continuous
welfare ordering over the set of all utility profiles and let W be a continuous collective utility
function representing .
a. (4) Give the continuous collective utility function that satisfies all four properties: (i) independence of unconcerned agents, (ii) independence of common scale, (iii) the Pigou-Dalton transfer
principle and (iv) independence of individual scale of utilities.
Next, consider the time-sharing problem with three agents, Anice, Bjorn and Carol, and three
alternatives, 1, 2 and 3, given by
Anice
Bjorn
Carol
1
1
0
1
0
1
0
1
0
in which the numbers yield the utilities of the agents for each of the alternatives. Any mix
between the three alternatives can be implemented.

b. (3) Give all classical utilitarian solutions.
c. (3) Give all solutions according to the egalitarian collective utility function.
d. (3) Give the solution according to the leximin social welfare ordening.
e. (3) Give the Nash solution.
In the following, let the utilities of the agents for each of the decisions be given by:
Anice
Bjorn
Carol
1
2
0
1
0
3
0
2
0
f. (3) Argue that the Nash solution is equal to the solution found at c.
g. (3) Show that the classical utilitarian solution does not satisfy the independence of individual
scale of utilities.

Consider the jury problem with n = 3 voters, individual competence p = 0.9 and = 0.5. Assume
the jury applies simple majority rule.
a. (4) Compute collective competence C, i.e. the probability that the verdict is correct assuming
each individual votes independently.
b. (4) Now assume n = 100. Without computing the exact value elaborate why or why not C100
is larger than collective competence with 3 jury members.
c. (4) For which values of p does collective competence tend to 1 for n ?

a. (4) Show that the Shapley value always assigns a payoff vector in the Core of a TU-game
if the game is superadditive. (So, show that f Sh (N, v) Core(N, v) if (N, v) is a superadditive
TU-game).
b. (7) Show that the Equal division solution is the unique solution for TU-games that satisfies
efficiency, the nullifying player property, symmetry and linearity.
For questions c and d, consider the cooperative TU-game (N, v) with N = {1, 2, 3} and v({1}) =
1, v({2}) = v({3}) = 2, v({1, 2}) = v({1, 3}) = 2, v({2, 3}) = 3 and v({1, 2, 3}) = 4.
c. (3) Compute the Harsanyi dividends of this game.
d. (2) Compute the Shapley value of this game.

Consider the social choice situation (N, A, p) with set of agents (voters) N = {1, 2, 3}, set of
alternatives A = {a, b, d, c} and preference profile p = (pi )iN given by
a
b
c
b
d
d
c
a
a
d
c
b
a. (3) Give the corresponding simple majority win digraph Dp .

b. (4) Find the outcome of the -measure (Dp ), and give the corresponding choice set
C (N, A, p).
c. (4) Find the outcome of the -measure (Dp ), and give the corresponding choice set C (N, A, p).

Consider the following network given by a stochastic matrix.
T =
0 1/2 0 1/2
1/3 1/3 1/3 0
0 1/3 1/3 1/3
1/2 0 1/2 0
a. (3) Draw the associated network.

b. (3) Compute limt T t .
c. (4) Now assume the 4 agents are connected by a star network with agent 1 in the center.
Determine the associated stochastic matrix T by assuming an undirected network in which each
agent weighs her links equally. Assume no agent has a link to herself.
d. (4) Compute limt T t for the network given in c.

Let be given a market of a homogeneous indivisible commodity. For some number K 1, there
are 2K sellers, each seller owns one item. Let pj be the reservation price of seller j, j = 1, . . . , 2K,
and assume that pj < pj+1 for every j = 1, 2, . . . , 2K 1. There are K buyers, each buyer wants
to have one item. Let pj be the reservation price of buyer j, j = 1, . . . , K, and assume that
K
minK
j=1 p pK+1 .
a. (4) Give the set of all competitive equilibrium prices.
b. (3) For a payoff vector in the core of the associated game, let xj denote the payoff to buyer
j, j = 1, . . . , K. Argue that for any buyer j it holds that xj pj pK+1 .
c. (3) For a payoff vector in the core of the associated game, let xj denote the payoff to seller j,
j = 1, . . . , 2K. Give xj for any seller j > K.
Re-Exam Mastercourse Strategic and Cooperative Decision Making

19 March 2015
Problem 1 (12 credits). Consider the following strict preference profile with seven voters and
four candidates.
Voters Voters Voters
1-3
4-5
6-7
c
b
a
b
a
d
a
d
c
d
c
b
a. (3) Does this preference profile have a Condorcet winner? If Yes, what alternative(s) is (are)
the Condorcet winner(s)?
b. (3) Check whether the preference profiles are single peaked under the order a < b < c < d.
c. (3) Name a social choice method for seven voters that is strategy proof for any rational (i.e.
complete and transitive) preference orderings over any set of candidates A with |A| 3.
d. (3) Show that the Borda preference aggregation method does not satisfy independence of
irrelevant alternatives. (Hint: use this example.)
Problem 2 (16 credits).

Consider the cooperative TU-game (N, v) with N = {1, 2, 3} and v = u{1,2} + u{1,2,3} where uT
is the unanimity game of coalition T N, T 6= .
a. (3) Compute the Shapley value of this game.
b. (3) Compute the Banzhaf value of this game.
c. (7) Show that efficiency, the null player property and fairness determine the payoffs according
to the Shapley value.
d. (3) Show that the Banzhaf value satisfies the null player property.

Consider the sequencing problem (N, p, q, ) with three agents N = {1, 2, 3} with linear waiting
cost function q1 (t) = 2t, q2 (t) = 7t and q3 (t) = 10t, processing times p1 = p2 = p3 = 1, and
(i) = i, i {1, 2, 3}.
a. (4) Give the corresponding sequencing game (N, v).
b. (4) Compute mu (v, L), ml (v, L), f e (v, L) and Sh(v) for this example taking L = {{1, 2}{2, 3}}.
c. (4) Give the Core of the sequencing game. Draw a figure of the Core and the four outcomes
computed in b.
d. (4) Argue that mu satisfies upper equivalence.

Three agents have to agree on a division of 2 different items. Money transfers are not allowed
and the items are indivisible, but each item can be divided by allocating time-shares in the item
to the agents. The agents have expected utility functions, where the utilities of the single items
for the agents are given by
item
Agent 1
Agent 2
Agent 3
10
5
5
0
1
2
a. (3) Argue that the CEEI solution allocates item B completely to agent 3.
b. (4) Give the time-shares of item A according to the CEEI solution. Give also the equilibrium
price ratio in the CEEI solution.
c. (4) Show that the CEEI solution is envy-free.
d. (4) Which division is recommended by the EE solution? Show that this solution is not envyfree.

Consider a network of 4 nodes.
a. (3) How many network configurations are possible with 4 nodes?
b. (6) Draw a network such that a learning process according to the DeGroot model converges.
Give the associate Markov chain matrix and explain why the process converges on your network.
c. (4) Now consider a network in the form of a circle of n nodes and let n go to infinity. Explain
why the presence of self-links determines whether this ever growing network is wise.

Consider a star-type road network with center node indexed 0 and four outer nodes, indexed by
j = 1, 2, 3, 4. There is a road from center node 0 to each of the four outer nodes. The distance
from node 0 to node j is equal to 1 for j = 1, 2, 3 and equal to 5 for j = 4. At each of the four
outer nodes lives precisely one agent, there is no agent elsewhere. Suppose that a noxious facility
F (the closer one lives to the facility, the lower the utility) must be located somewhere on the
road network. Assume that the utility of the agent at node j is equal to uj = xj , j = 1, 2, 3, 4,
where xj is the distance from node j to the location of the facility.
a. (3) Give the optimal location of F according to the Classical Utilitarian collective utility
function.
b. (3) Give the optimal location of F according to Leximin Social Welfare Ordering.
c. (3) Give the optimal location of F according to Nash collective utility function.
Hint: The solution is on the road between node 0 and node 4.
d. (3) Now, assume that the utility of the agent at node j is equal to uj = dj + xj , j = 1, 2, 3, 4,
where dj is the distance from node j to node 0. One of the three solutions does not change under
this transformation of the utility functions. Which one and why?
e. (3) Now, assume that the utility of the agent at node j is equal to uj = j 2 xj , j = 1, 2, 3, 4.
One of the three solutions do not change under this transformation of the utility functions. Which
one and why?

a. (7) Show that the equal division rule is the unique solution for auction situations (where one
item of a good is to be assigned to one out of a set of n agents who can compensate the others)
that satisfies efficiency, symmetry and independence on lower valuations.
Now, consider a situation in which two items of a good must be allocated over the set N =
{1, 2, 3, 4} of four agents whose valuations are given by V = (V1 , V2 , V3 , V4 ) = (4, 5, 8, 15).
b. (3) Find the allocation and compensations according to the CEEI solution.
c. (3) Find the allocation and compensations according to the VP solution.
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20 December 2013

a. (3) Find the outcome according to the uniform losses solution.
b. (3) Find the outcome according to the contested garment method.
c. (3) Find the outcome according to the Reverse Talmud solution.
d. (4) For which values of t does the contested garment method assign payo 2 to agent 1.
e. (3) Which of the following four statements about a deficit sharing problem (with two agents)
is/are correct.
1. The Reverse Talmud rule is the dual of the Contested garment method.
2. The uniform gains solution is the dual of the uniform losses solution.
3. The proportional solution is self-dual.
4. The proportional solution satisfies truncation.

For a society of n agents, let be a complete, transitive, monotone, symmetric and continuous
welfare ordering over the set of all utility profiles and let W be a continuous collective utility
function representing .
a. (4) Give the continuous collective utility function that satisfies (i) independence of unconcerned agents, (ii) independence of common scale, (iii) the Pigou-Dalton transfer principle and
(iv) independence of individual zeros.
Next, consider the time-sharing problem with four agents, indexed A, B, C and D; and three
alternatives, indexed 1, 2, 3; given by
Alternatives
Agent
A
B
C
D
1
1
0
0
1
0
1
0
0
1
0
0
Remark: The row of zeros for agent D is not a mistake. Any mix between the three
alternatives can be implemented.
b. (4) Give all solutions according to the classical utilitarian collective utility function.
c. (4) Give all solutions according to the egalitarian collective utility function.
Now a fourth alternative, indexed by 4, becomes available and the resulting table becomes as
follows (notice that the columns for the alternatives 1, 2 and 3 are the same as before)
Alternatives
Agent
A
B
C
D
1
1
0
0
1
0
1
0
0
1
0
0
0
1
1
1
d. (4) Give the unique solution according to the leximin social welfare ordering.
e. (4) Show that the classical utilitarian solution does not satisfy resource monotonicity.

a. (4) Show by means of a simple example that Borda Count may fail to be strategy proof.
b. (4) Elaborate which conditions of Arrows Impossibility Theorem are violated by sequential
pairwise voting.
c. (4) Prove Condorcets Jury Problem.

Consider the cooperative TU-game (N, v) with N = {1, 2, 3} and v({1}) = v({3}) = 0, v({2}) =
1, v({1, 2}) = v({1, 3}) = 2, v({2, 3}) = 4 and v({1, 2, 3}) = 5.
a. (3) Compute the Shapley value of this game.
b. (3) Find the core of this game.
c. (3) Verify if this game is convex.
d. (2) Verify if this game is superadditive.
Now, consider the game (N, v) with N = {1, 2, 3, 4} and v = u{1,2,3} + u{2,3,4}
e. (5) Show that eciency, symmetry and coalitional strategic equivalence determine the outcome according to the Shapley value.

a. (7) Show that the equal division rule is the unique solution for auction situations (where one
item of a good is to be assigned to one out of a set of n agents who can compensate the others)
that satisfies eciency, symmetry and independence on lower valuations.
Now, consider a situation in which two items of a good must be allocated over the set N =
{1, 2, 3, 4, 5} of four agents whose valuations are given by V = (V1 , V2 , V3 , V4 ) = (2, 4, 5, 10, 14).
b. (3) Find the allocation and compensations according to the VP solution.
See next page for Problems 6 and 7.

Consider the following network given by a stochastic matrix
T =
0 1/2 0 1/2
1/3 1/3 1/3 0
.
0 1/3 1/3 1/3
1/2 0 1/2 0
a. (3) Draw the corresponding graph.

b. (3) Explain why T t converges and determine its limit.
c. (4) Consider an undirected ring network with n agents where each node is connected to its
left and right neighbor and one agent is placed in the middle, connected to all others. Also assume
self-links. Determine the corresponding stochastic matrix if each agent weighs her links equally.
d. (4) Elaborate whether the network in c. is wise for n .

Let be given a market of a homogeneous indivisible commodity. For some number K 1, there
are 2K sellers, each seller owns one item. Let pj be the reservation price of seller j, j = 1, . . . , 2K,
and assume that pj < pj+1 for every j = 1, 2, . . . , 2K 1. There are K buyers, each buyer wants
to have one item. Let pj be the reservation price of buyer j, j = 1, . . . , K, and assume that
p1 > p2 > > pK > pK+1 .
a. (4) Give the set of all competitive equilibrium prices.
b. (4) Let Shj be the Shapley payo of seller j, j = 1, . . . , 2K, in the associated cooperative
TU-game. Argue that for any seller j K + 1, the Shapley payo Shj goes to zero when K
grows large.
c. (4) Again assume that pj < pj+1 for every seller j = 1, 2, . . . , 2K 1, except that pK = pK+1 .
Let x IR3K be a payo vector in the core of the associated game. Give the payo xj to buyer
j, j = 1, . . . , K.
Faculty of Economics and Business Administration

Exam:
ReExam Strategic and Cooperative Decision Making
Code:
E_EORM_SCDM
Examinator:
Rene van den Brink, Gerard van der Laan, Ines Lindner
Co-reader:
Rene van den Brink, Gerard van der Laan, Ines Lindner
Date:
19 December, 2014
Time:
8:45
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
No
Number of questions: 7
Type of questions:
Open
Answer in:
Dutch / English
Remarks: During the exam questions about the exam will not be answered.
Credit score:
(For example: 100 credits counts for a 10, maximum credit score is 5 credits for
each question.)
Grades:
The grades will be made public on: January 16, 2014.
Inspection:
(Monday January 27 2014 at 13.30, room will be announced).
Number of pages:
7 (including front page)
Good luck!

19 December 2014
Problem 1 (12 credits). Consider the following sequence of preference lists:

a
c
b
b
a
c
c
b
a
a. (3) Find a social choice procedure that yields alternative c as the winner.
b. (3) Use the given preference lists to explain Condorcets Paradox.
c. (3) Show that the order a < b < c does not yield single-peakedness. Is there an order which
does? For this case determine the peak of the median voter.
d. (3) In general, what does the median voter theorem say about this median peak?
Problem 2 (18 credits).

It is known that the Shapley value satisfies efficiency, the null player property, symmetry and
linearity.
a. (8) Show that the Shapley value is the unique solution for TU-games that satisfies these
axioms.
2, v({1, 2}) = v({1, 3}) = 2, v({2, 3}) = 3 and v({1, 2, 3}) = 4.
b. (3) Compute the Harsanyi dividends of this game.
c. (3) Compute the Shapley value of this game.
d. (4) Give a superadditive game (N, v) such that f Sh (N, v) 6 Core(N, v). (So, the Shapley
value should assign a payoff vector that is not in the core.)

Consider the deficit sharing problem (N, t, x) with N = {1, 2}, t = 4 and x = (2, 5).
a. (3) Find the outcome according to the contested garment method.

b. (5) Show that truncation, concession and equal treatment of equals determine the outcome
according to the contested garment method.
c. (4) For which values of t does the Reverse Talmud rule assign payoff 0 to agent 1?
Now, consider an excess sharing problem (N, t, x) with N = {1, 2}. Let y prop = (y1prop , y2prop ) and
y es = (y1es , y2es ) be the outcomes assigned to this problem by the proportional solution and the
equal surplus solution, respectively.
d. (4) Show that x1 x2 implies that y1prop y1es .

Consider an international river running through three countries, country U (Upstream country),
country M (Middle country) and country D (Downstream country). At the most upstream country U there is an inflow of 100 units of water, at the two other countries the inflow is zero. The
countries have linear benefit functions, given by bi (xi ) = bi xi , i = U, M, D with bU = 1, bM = 4
and bD = 7.
a. (3) Model this river situation as a cooperative game according to the ATS principle.
b. (3) Give the welfare distribution according to the downstream incremental solution.
c. (3) Model this river situation as a cooperative game according to the UTI principle.
d. (3) Give the three hierarchical outcomes of the UTI river game.
e. (3) Show that the average hierarchical outcome of the UTI river game satisfies the property
of -TIBS fairness for = ( 13 , 13 , 31 ).

Consider the networks of Figure 1, 2 and 3 at the end of this document for a learning process
according to the DeGroot model. Assume that there are no self links and that each agent (node)
weighs his or her links equally.
a. (4) For the 2 networks of Figure 1 elaborate whether the associated Markov process converges.
(Hint: you dont need to write down the Markov chain matrix). If there is no convergence provide
an initial belief that leads to cyclic belief updating.
b. (4) Give the matrix of the associated Markov chain of Figure 2. Elaborate why this process
converges and derive the influence vector s = (s1 , s2 , s3 , s4 ), where si denotes the influence measure of agent (node) i.
c. (5) Consider the variation of a star network in Figure 3. Here, 5 triads (complete networks
among three nodes) are added to a center node which is connected to all other nodes. Now
consider the infinite process which keeps adding triads to the center. Argue whether or not this
ever growing network is wise.

Consider a star-type road network with center node indexed 0 and four outer nodes, indexed by
j = 1, 2, 3, 4. There is a road from center node 0 to each of the four outer nodes. The distance
from node 0 to node j is equal to 1 for j = 1, 2, 3 and equal to 5 for j = 4. At each of the four
outer nodes lives precisely one agent, there is no agent elsewhere. Suppose that a desirable facility
F must be located somewhere on the road network. Assume that the utility of the agent at node
j is equal to uj = 6 xj , j = 1, 2, 3, 4, where xj is the distance from node j to the location of the
facility.
a. (3) Give the optimum location of F according to the Classical Utilitarian collective utility
function.
b. (3) Give the optimum location of F according to Leximin Social Welfare Ordering.
c. (3) Give the optimum location of F according to Nash collective utility function.
Hint: The solution is on the road between node 0 and node 4.
d. (3) Now, assume that the utility of the agent at node j is equal to uj = dj xj , j = 1, 2, 3, 4,
where dj is the distance from node j to node 0. One of the three solutions does not change under
this transformation of the utility functions. Which one and why?
e. (3) Now, assume that the utility of the agent at node j is equal to uj = 8 xj , j = 1, 2, 3, 4,
where dj is the distance from node j to node 0. Two of the three solutions do not change under
this transformation of the utility functions. Which of the two and why?

Consider a situation in which two items of a good must be allocated over the set N = {1, 2, 3, 4, 5}
of five agents whose valuations are given by V = (V1 , V2 , V3 , V4 ) = (1, 3, 4, 7, 10).
a. (4) Find the allocation and compensations according to the CEEI solution.
c. (3) Show that the VP solution is not envy-free.
Figures for exercise 5
Figure 1: Square with 4 nodes and circle with 15 nodes.
Figure 2: Directed network with 4 nodes.
Figure 3: Star with triads.
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21 December 2012

Consider the excess sharing problem (N, t, x) with N = {1, 2, 3, 4}, t = 40 and x = (3, 4, 10, 16).
b. (3) Find the outcome according to the uniform losses solution.
c. (2) Find the outcome according to the contested garment solution.
d. (5) Show that equal treatment of equals, concession and truncation determine the outcome
according to the contested garment method. (In other words, show that a solution that satisfies
equal treatment of equals, truncation and concession assigns the outcome you found in b to this
deficit sharing problem.)
e. (4) Show that the uniform losses solution does not satisfy concession.
Problem 2 (12 credits). Two agents, A and B have to divide 50 euro. The utility of agent A
for money amount x is given by uA (x) = x and the utility of agent B for a money amount x is
given by uB (x) = 2x.
a. (4) Give the division of the 50 euro according to the classical utilitarian solution and according
to the egalitarian solution.
b. (4) Give the division of the 50 euro according to the Nash bargaining solution and according
to the KS (Kalai-Smorodinsky) solution. To find these divisions, take the minimal utility (disagreement utility) to be equal to zero.
c. (4) Reconsider the division problem again, but now under the restriction that agent B is not
allowed to get more than 30 euro. Show that the KS solution does not satisfy the Independence
of Irrelevant Alternatives property.
Problem 3 (12 credits). Suppose we have three voters and four alternatives and suppose the
individual preference lists are as follows:
a
c
b
b
a
d
d
b
c
c
d
a
a. (3) What alternative(s) is (are) the Borda winner(s)?
b. (3) Which voters have single-peaked preferences with the order c < d < b < a?
c. (3) Show the following for the given three preference lists: if the social choice procedure being
used is sequential pairwise voting with a fixed agenda, and, if you have agenda setting power (i.e.,
you get to choose the order), then you can arrange for whichever alternative you want to be the
social choice.
d. (3) In general, show that on the class of voting problems with single-peaked preferences the
Condorcet method (sequential pairwise voting) is strategy proof.

It is known that the Shapley value satisfies eciency, the null player property, symmetry and
linearity.
a. (7) Show that the Shapley value is the unique solution that satisfies eciency, the null player
property, symmetry and linearity.
1, v({1, 2}) = 2, v({1, 3}) = 4, v({2, 3}) = 3 and v({1, 2, 3}) = 5.
b. (3) Is this game superadditive?
c. (3) Compute the Harsanyi dividends of this game.
d. (3) Compute the Shapley value of this game.
e. (3) Show that the Banzhaf value is not ecient.

Consider a situation in which one item of a good must be allocated over the set N = {1, 2, 3, 4}
of four agents whose valuations are given by V = (V1 , V2 , V3 , V4 ) = (3, 5, 8, 14)
a. (3) Find the allocation and compensations according to the CEEI solution.
c. (3) Show that the VP solution is not envy-free.
Now, consider a situation in which two items of a good must be allocated over the set N = {1, 2, 3}
of four agents whose valuations are given by V = (V1 , V2 , V3 ) = (3, 5, 8)
d. (4) Find the allocation and compensations according to the Shapley rule.

a. (4) In the EU Council of Ministers, a restricted number of policies judged to be sensitive shall
remain subject to unanimity voting.1 Determine the Banzhaf measure, Shapley-Shubik index and
the power of a collectivity to act for this rule.
b. (5) Consider the weighted representation of the Treaty of Nice in Table 1 (see last page of this
document), in particular Group 1 of the 4 largest countries and Group 2 of the 4 smallest countries. Applying Penroses square root rule, explain whether one of the groups is over-represented
in comparison to the other.
c. (4) The Treaty of Nice has often been criticized. Explain why the Lisbon Treaty is considered
as an improvement.
Specifically taxation, social security or social protection, the accession of new States to the European Union,
foreign and common defence policy and operational police cooperation between the Member States.
There are seven agents and seven heterogeneous items distributed amongst the agents such that
agent i has item i, i = 1, 2, . . . , 7. The preferences of the agents over the items are given in the
table below (the first row means that the first agent prefers item 6 above 5 above 1 above 4 and
so on).
agent
preferences
1
2
3
4
5
6
7
(6,5,1,4,7,3,2)
(7,3,1,2,4,5,6)
(4,7,5,2,3,1,6)
(5,4,7,1,2,3,6)
(3,4,1,7,2,5,6)
(5,3,2,6,7,4,1)
(3,1,2,6,7,4,5)
a. (4) Give a vector of equilibrium prices and the equilibrium distribution of the items among
the agents.
b. (3) Show that there is no other distribution of the items that gives an Pareto improvement
of the equilibrium distribution.

Consider an international river running through three countries, country U (Upstream country),
country M (Middle country) and country D (Downstream country). A the most upstream country U there is an inflow of 100 units of water, at the two other countries the inflow is zero. The
countries have linear benefit functions, given by bi (xi ) = bi xi , i = U, M, D with bU = 1, bM = 4
and bD = 7.
a. (4) Give the corresponding river game.
b. (4) To each country corresponds a hierarchical outcome of the river game. Give the three
hierarchical outcomes.
c. (4) Show that the average hierarchical outcome satisfies the property of Equal Weights TIBS
fairness.
Table 1: Weighted Representation of EU Qualified Majority Rule in Treaty of Nice

Country
Germany
UK
France
Italy
Spain
Poland
Romania
Netherlands
Greece
Czech Rep
Belgium
Hungary
Portugal
Sweden
Bulgaria
Austria
Slovakia
Denmark
Finland
Ireland
Lithuania
Latvia
Slovenia
Estonia
Cyprus
Luxembourg
Malta
Total
w
(%)
(%)
(%)
(%)
82,437,995
60,393,100
62,998,773
58,751,711
43,758,250
38,157,055
21,610,213
16,334,210
11,125,179
10,251,079
10,511,382
10,076,581
10,569,592
9,047,752
7,718,750
8,265,925
5,389,180
5,427,459
5,255,580
4,209,019
3,403,284
2,294,590
2,003,358
1,344,684
766,414
459,500
404,346
118
117
117
117
108
108
56
52
48
48
48
48
48
40
40
40
28
28
28
28
28
16
16
16
16
16
12
8.5199
8.4477
8.4477
8.4477
7.7978
7.7978
4.0433
3.7545
3.4657
3.4657
3.4657
3.4657
3.4657
2.8881
2.8881
2.8881
2.0217
2.0217
2.0217
2.0217
2.0217
1.1552
1.1552
1.1552
1.1552
1.1552
0.8664
2.7356
2.7356
2.7356
2.7356
2.6145
2.6145
1.5166
1.4148
1.3153
1.3153
1.3153
1.3153
1.3153
1.1037
1.1037
1.1037
0.7796
0.7796
0.7796
0.7796
0.7796
0.4469
0.4469
0.4469
0.4469
0.4469
0.3374
7.7145
7.7145
7.7145
7.7145
7.3732
7.3732
4.2771
3.9900
3.7092
3.7092
3.7092
3.7092
3.7092
3.1126
3.1126
3.1126
2.1984
2.1984
2.1984
2.1984
2.1984
1.2603
1.2603
1.2603
1.2603
1.2603
0.9514
8.6799
8.6670
8.6670
8.6670
7.9888
7.9888
3.9925
3.6866
3.3977
3.3977
3.3977
3.3977
3.3977
2.8137
2.8137
2.8137
1.9594
1.9594
1.9594
1.9594
1.9594
1.1209
1.1209
1.1209
1.1209
1.1209
0.8310
492,964,961
1 385
Population
Quota: 1 034 = 74.66% of 1 385.

w: voting weight, w
(%): voting weight in percentage terms
(%): Banzhaf measure in percentage terms, (%): normalized Banzhaf in percentage terms
(%): Shapley-Shubik index in percentage terms

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Exam Mastercourse Strategic and Cooperative Decision Making

Problem 1 (15 credits)

a. (3) What alternative(s) is (are) the Borda winner(s)?

Problem 4. (17 credits)

Problem 5 (12 credits)

Problem 6 (13 credits)

Problem 8 (11 credits)

Table 1: Weighted Representation of EU Qualified Majority Rule in Treaty of Nice

Quota: 1 034 = 74.66% of 1 385.

Re Exam Mastercourse Strategic and Cooperative Decision Making

Problem 1 (15 credits)

Problem 2 (22 credits)

between the three alternatives can be implemented.

Problem 3. (12 credits)

Problem 4. (16 credits)

Problem 5 (11 credits)

a. (3) Give the corresponding simple majority win digraph Dp .

Problem 6 (14 credits)

1/3 1/3 1/3 0

0 1/3 1/3 1/3

a. (3) Draw the associated network.

Problem 7 (10 credits)

Re-Exam Mastercourse Strategic and Cooperative Decision Making

Problem 2 (16 credits).

Problem 3 (16 credits)

Problem 4 (15 credits)

Problem 5 (13 credits)

Problem 6 (15 credits)

Problem 7 (13 credits)

Tentamen 14 december 2009, vragen

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Exam Mastercourse Strategic and Cooperative Decision Making

Problem 1 (16 credits)

Problem 2 (20 credits)

Problem 3 (12 credits)

Problem 4. (16 credits)

Problem 5 (10 credits)

See next page for Problems 6 and 7.

Problem 6 (14 credits)

1/3 1/3 1/3 0

a. (3) Draw the corresponding graph.

Problem 7 (12 credits)

Faculty of Economics and Business Administration

ReExam Strategic and Cooperative Decision Making

2 hours and 45 minutes

The grades will be made public on: January 16, 2014.

(Monday January 27 2014 at 13.30, room will be announced).