ECO 2302 PRIN MACO W/MYECO ACC >IP<
4th Edition
ISBN: 9781323504161
Author: CASE
Publisher: PEARSON C
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Chapter 21, Problem 1.2P
To determine
Identify the selection bias in the original British plan.
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Consider the charity auction. In many charity auctions, altruistic celebrities auction objects with special value for their fans to raise funds for charity. Madonna, for example, held an auction to sell clothing worn during her career and raised about 3.2 million dollars. In the charity auction the winner of the lot is the highest bidder. The difference with the standard auction is that all bidders are required to pay an amount equal to what they bid.
Suppose there are two bidders and assume bidders have valuations randomly drawn from the interval [2, 4] according to the uniform distribution.
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A new government lottery has been announced. Each person who buys a ticket submits an integer between 0 and 100. The winner is the person whose submission is closest to four-fifths of the average of all submissions. If ties occur, the price will be shared. If Chloe expects other players to select numbers randomly, what number should she choose?
Chloe should choose the number (a)_____
if you expect all other players to exhibit the same depth of reasoning as Chloe, what number would you choose?
you should choose the number (b)______
In this version of the ultimatum game experiment, one participant is given £100, and is told to offer to split that amount with another participant. The second player can either refuse to accept the division, in which case the participant receiving the £100 has to give it back, or can accept the division, in which case, the player receiving the money splits the £100 as proposed.
For the participant who has to accept or reject the offer
A) The best strategy is to accept any offer which meets the social norm for fairness.
B) The best strategy is to threaten to turn down any transfer of less than £100 to ensure that the person receiving the money makes a fair offer.
C) There is a dominant strategy to accept any offer because gaining some money is better than gaining no money
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Chapter 21 Solutions
ECO 2302 PRIN MACO W/MYECO ACC >IP<
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