Boston Would Be Lucky to Lose the Olympics Competition There's no evidence that the Games boost tourism, and the costly new facilities turn into white elephants - Jan 9, 2015 WSJ "Construction executives in Boston celebrated on Thursday as the U.S. Olympic Committee selected the city to be America's candidate in the world-wide competition to host the 2024 Summer Games. Their companies will get lots of new, large contracts. Informed taxpayers in Boston were more subdued. They will have to pick up most of the tab. There is always great hype about hosting the Olympics. City and business leaders anticipate exposure, leading to increases in tourism, trade and investment. With a few exceptions, these buoyant expectations are not realized. A candidate city can expect to spend between $70 million and $100 million on its Olympic bid. venues as well as an Olympic Village, infrastructure, security, consulting agencies for planning and PR, staffing and travel, glossy publications etc. Chicago spent $100 million on its failed bid for the 2016 games." Questions: i. Construct a game in which each of two cities (Boston & New Orleans) that are candidates to host the Olympics has the option to propose either a basic or extravagant Games. If each chooses to basic, then each has a payoff of 10. If each chooses extravagant, then each has a payoff of 5. If Boston chooses to basic and New Orleans chooses extravagant, then Boston's payoff is 2 and New Orleans' is 12. If New Orleans chooses to basic and Boston chooses extravagant, then New Orleans' payoff is 2 and Boston's is 12. What is the Nash equilibrium of the game? Which actions maximize the sum of the payoffs? Does the Nash equilibrium result in the underfunding of the Games? Is this an example of the prisoner's dilemma? Explain. Please solve this with in 30 minuts

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 6 Boston Would Be Lucky to Lose the Olympics Competition There's no evidence that the Games boost tourism, and the costly new facilities turn into white elephants - Jan 9, 2015 WSJ "Construction executives in Boston celebrated on Thursday as the U.S. Olympic Committee selected the city to be America's candidate in the world-wide competition to host the 2024 Summer Games. Their companies will get lots of new, large contracts. Informed taxpayers in Boston were more subdued. They will have to pick up most of the tab. There is always great hype about hosting the Olympics. City and business leaders anticipate exposure, leading to increases in tourism, trade and investment. With a few exceptions, these buoyant expectations are not realized. A candidate city can expect to spend between $70 million and $100 million on its Olympic bid. venues as well as an Olympic Village, infrastructure, security, consulting agencies for planning and PR, staffing and travel, glossy publications etc. Chicago spent $100 million on its failed bid for the 2016 games." Questions: i. Construct a game in which each of two cities (Boston & New Orleans) that are candidates to host the Olympics has the option to propose either a basic or extravagant Games. If each chooses to basic, then each has a payoff of 10. If each chooses extravagant, then each has a payoff of 5. If Boston chooses to basic and New Orleans chooses extravagant, then Boston's payoff is 2 and New Orleans' is 12. If New Orleans chooses to basic and Boston chooses extravagant, then New Orleans' payoff is 2 and Boston's is 12. What is the Nash equilibrium of the game? Which actions maximize the sum of the payoffs? Does the Nash equilibrium result in the underfunding of the Games? Is this an example of the prisoner's dilemma? Explain. Please solve this with in 30 minuts

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