Tuesday, December 18, 2012

Topic 17: Tragedy of the Commons Experiment


Consider the fishing game we did in class last week and write about your experience. Use the questions below to guide your writing. Due Monday, Dec. 24.
  1. Did anyone at your lake take too many fish?  How did that make you feel?  Did everyone try to take as many as possible? Why or Why not?  Does society reward those with the “most”?
  2. Did anyone sacrifice the number of fish he or she took for the good of the community?  Why or why not?  Does society ever reward that type of person?
  3. How did your strategy change in game 2 (if at all)? Does it make a difference to know what the rewards are?
  4. Is it possible to maximize the number of fish caught per person as well as the number of fish remaining in the pond at the same time?Why or Why not?
  5. Think of a local commons that you are familiar with (a park, sidewalk, or the sofa area or cafeteria at PAS) Do similar situations arise? Explain. HOW might those problems be solved?
  6. What are some natural resources that are common resources?
  7. What are the global commons? Are these being used wisely? Why or why not?
  8. What can people do to use these resources most wisely?
  1. The people in my group all tried to take as many fish as possible. When I saw someone else taking a large amount of fish, I automatically tried to take as many fish as possible as well in order to "not lose". People had a feeling of competitiveness, and think that if we don't take the fish, someone else will, so why not just take it? At first, society rewards those with the most fish, but later on, when the resource depletes, everyone will die.
  2. Later on during the experiment, when we found out that the resource was being depleted, some people did release some fish back into the lake. They did so because they remembered that they shouldn't deplete the resources now, or else there will be no available resources in the future and everyone will starve. However, society doesn't reward them, and some other fisherman even wanted to fish for the ones released back into the lake.
  3. Our strategies in the 2nd round completely changed. Everyone followed the agreed rules and fished only a certain amount. Because of this, we had an ample amount of remaining fish. It does make a difference, and a big one at that, to know that the reward would be to have fish available for the coming years.
  4. It is possible to maximize the number of fish caught per person as well as the number of fish remaining by creating a formula and calculating how many fish can be caught and how many must remain in order for enough to be available in the future.
  5. When I think about some of the local commons, such as parks, sidewalks, sofa area, or cafeteria, I cannot think of similar situations, since these areas cannot be used "too many time", and the resources don't exhaust as they are being used.
  6. Some common natural resources include food supplies such as fish.
  7. As said before, fish is global common because people anywhere, as long as they are on the cost, can fish and use these resources. Currently, the global community do face these problems and these resources aren't being used wisely. However, there are regulations now to help solve this problem.
  8. To use resources most wisely, there must be regulations.


Sunday, December 16, 2012

Topic 16: Game Theory and Chicken

This week we experimented with game theory using "The Prisoner's Dilemma." We found that the equilibrium (the Nash Equilibrium) occurs when each player acts in his/her own best interest no matter what the other does. As we found, this always ends up in a "bad" result. Considering the video clip and what Nash says about Adam Smith, and considering the results of our experiment, comment on your thoughts and feelings about how people behave in competitive situations.

  • Game theory assumes that people make rational decisions. Do you think that assumption is valid?
  • Do you think that the "bad" outcome is always inevitable? Why or why not?
  • Under what circumstances might a better outcome occur (think of what Nash says in the video)?

  • Game theory's assumption that people make rational decisions is mostly true. However, there are two cases where this is not the case. The first one is when people are emotional. Scientific studies have proved that the limbic system may sometimes overcome our rational brain, and thus result in irrational and impulsive decisions and actions. The other case is when people are uninformed. When people do not know all information pertaining to something, then they cannot make the best and most rational choice.
  • The "bad" outcome is inevitable unless during exceptions such as when people make mistakes or during accidents (and they get lucky and stumble upon the best outcome for them). We assume that people always make rational decision; because of this, they always choose the action that's best for them. And these actions are always one of the "bad" outcomes due to the Nash equilibrium (people choose the dominant strategy).
  • As mentioned above, a better outcome might be accidental, when people make mistakes, or when accidents happen and something out of human being's control happens. Another way for a better outcome to happen is, as Nash said, for people to communicate and cooperate so that they all get the best out of what is available.

Monday, December 3, 2012

Topic 15: What is a Monopoly?


After watching the video "What is a Monopoly," respond to the questions below:
1. What are the three main characteristics that make a firm a monopoly?
2. How does a monopoly firm decide how much to produce and what price to charge?
3. What are the costs and benefits of monopoly to the monopolist firm and to society?
4. In the video, one commentator mentions some of the problems with monopolies, but he says that those aren't what economists are concerned with. What are the problems he is referring to? If economists are not concerned with those problems, what are they concerned about? Do you agree with their concerns?
5. Monopolies are often looked at as bad. Can they also be good? Under what circumstances could a monopoly be a good thing?
6. Given that in the long run monopolists spend all of their surplus in maintaining their monopoly position, do you think it is worth it to try to attain a monopoly? Why or why not?
  1. The three main characteristics that main a firm a monopoly are that there is only one firm in the market, the product is unique and there are no substitutes for it, and there are barriers to entry for the market.
  2. Monopoly decides how much to produce by choosing the quantity where marginal cost equals to marginal revenue, and it decides how to charge its product by charging the highest price that people are willing to pay on the market demand curve for the good.
  3. The costs of monopolies are that a deadweight loss arises when the monopoly is not completely efficient. The benefits of monopolies are that monopolies encourage innovation and research (since there are patents), and society can enjoy cheaper prices since only one firm supplies a product, and a larger quantity supplied means that average total cost is spread out, lowering the costs.
  4. The problem that the economists are not concerned with is the transferring of income from consumers to monopolists, and that in competitive markets, prices will be lower and quantity produced will be higher. The economists are concerned with the inefficiency and efficiency of monopolies, and whether or not deadweight lost arises. If talking about fairness, then I do not agree with the economist's concern about efficiency. However, if talking about productivity and the use of resources, then yes, I do agree with the economists view for efficient monopolies.
  5. Monopolies can be considered good because if the average cost is decreasing, then there are advantages to large scale manufacturing and production.
  6. If, in the long run, a monopoly spends all of its surplus to maintain its position, then it is not worth it to attain a monopoly because it would mean that a lot of resources that could be used for other things would be wasted and not properly distributed between the consumers and the producers, which is a huge opportunity cost.