Problem Set 4

Economics I (Microeconomics) uc3m

1. Do exercise 4.5 in the book

2. Two women stand before King Solomon. Both claim to be the mother of a baby boy
(one is the mother and one is the mother of a dead baby; both women live in the
same house). King Solomon suggests the following solution: "Cut the live child in
two, and give half to one and half to the other (1 Kgs. 3:25)." The alternative is that
one mother gives up her claims on the child (if both give up the child is asigned at
random).
 Assume the two women believe Solomon follows through with his
proposal. Each women can accept Solomons proposal or give up the claims
on the child. From best (=4) to worst (=1) order the different action pairs
of mother (M) and imposter (I). An action pair is e.g. "M opposes, I
accepts."
 Use your answer from above to write down the matrix of the game
 Suppose the women think Solomon is a wise man. Do you think the game

would still work?

3. Consider the Pest Control Problem of Anil and Bala. Suppose we want to introduce
peer punishment into that model. To do so we introduce a third player (the town)
who act after they see the choices of Anil and Bala. They can be either friendly (f)
or unfriendly (u) to Anil and Bala. Try to construct a game in which the reaction of
the town to Anil’s and Bala’s behavior makes using the terminator not a dominant
strategy any more. Do you think such peer punishment is realistic in that setting? u