The New York City Council is ready to vote on two billsthat authorize the construction of new roads in Manhattanand Brooklyn. If the two boroughs join forces, they can passboth bills, but neither borough by itself has enough powerto pass a bill. If a bill is passed, then it will cost the taxpayersof each borough $1 million, but if roads are built in aborough, the benefits to the borough are estimated to be $10million. The council votes on both bills simultaneously, andeach councilperson must vote on the bills without knowinghow anybody else will vote. Assuming that each boroughsupports its own bill, determine whether this game has anyequilibrium points. Is this game analogous to the Prisoner’sDilemma? Explain why or why not.

We are going to use game theoretic approach to answer this question.

Answered: The New York City Council is ready to…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.11P

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The New York City Council is ready to vote on two bills
that authorize the construction of new roads in Manhattan
and Brooklyn. If the two boroughs join forces, they can pass
both bills, but neither borough by itself has enough power
to pass a bill. If a bill is passed, then it will cost the taxpayers
of each borough $1 million, but if roads are built in a
borough, the benefits to the borough are estimated to be $10
million. The council votes on both bills simultaneously, and
each councilperson must vote on the bills without knowing
how anybody else will vote. Assuming that each borough
supports its own bill, determine whether this game has any
equilibrium points. Is this game analogous to the Prisoner’s
Dilemma? Explain why or why not.

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