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A 1000 word max essay containing two policy briefs which analyse social dilemma in two game matrixes with application to a Scottish firm example:
Maximum length: 8 pages including appendices, but excluding cover sheet, title page, contents page and references.
Although this is an essay assignment, I am tasking you with producing two policy briefs (reports). The two policy briefs should be treated as two separate assignments, but depending on how you answer the questions, there may be some natural overlap (which is fine).
You should submit both policy briefs as one document, with one set of references, appendices and title page. For instance, a sample structure (which you are not compelled to follow) could be:
Cover Sheet (provided to you electronically)
Choose an example of a social dilemma, and illustrate this with non-cooperative game theory.
You may choose any social dilemma, but do not use examples discussed in the ESPP text or the lectures/seminars. I will award extra points for being original. Explain the social dilemma, and convince the reader (me) that it satisfies the criteria of a social dilemma.
You should describe your social dilemma in two game matrices, similar to Figures 2.3a and 2.3b of ESPP (beta). Your first payoff matrix therefore should be descriptive, and the second should be a payoff matrix showing the payoffs for each of the four hypothetical situations. (NOTE: you are encouraged to create payoffs that are relevant to your chosen social dilemma – do not simply use the example in the ESPP text. Again, I will award extra points for being original).
Explain the payoffs assigned to each strategy and outcome, and explain how they are relevant in explaining the social dilemma. Explain the ‘rules’ of your game (identify the players, discuss if there is full information, discuss whether this a repeated or one-shot game, etc.) Discuss the concepts of dominant strategies, Nash equilibrium and self-interested behaviour. Using your payoff matrix, describe the Nash equilibrium (or equilibria) in your chosen social dilemma, and explain what outcomes are predicted, and compare these with the outcomes that society would desire.
Finally, discuss whether your application of game theory to your chosen social dilemma is supported by real world evidence. Consider how the social dilemma could be overcome in the real world, and relate this back to your payoff matrix. Clearly explain how your proposed solutions would be successful in motivating the ‘players’ to a more socially-optimal outcome. Consider what your non-cooperative game would predict if social preferences, repeated games, altruism or government intervention were introduced, and explain why.
Apply your economic tools to a news article about a Scottish firm that was published sometime between 2018 and the present time.
You should briefly describe the firm in the news article: who owns it, who manages it, what it sells, and who its customers are. You should explain therefore how your chosen firm meets the criteria that define a firm, as discussed in class.
Clearly explain the difference between a price-setting firm and a price-taking firm, and explain whether the firm featured in your article better approximates a price setter or a price taker using evidence from the article and, if necessary, further research. (NOTE: few firms are pure price-takers, and few are pure price-makers, so you should decide – and give an explanation – as to which your firm more closely aligns to.)
Discuss the differences between price-setting and price-taking firms in relation to the firm discussed in your chosen news article. What are the incentives for innovation for this firm, and what elasticity of demand should it expect to have for the main goods or services that it sells?
Finally, interpret the news article in light of your understanding of economic theory. Explain how your application of economic theory to your chosen firm allows you to better understand (or to criticise) the news report.*
*It may be that your economic theory is consistent with the analysis in the news report, or that the writer has misinterpreted events due to a lack of economic theory, or that the events in the news report will likely have a particular impact on the firm’s price, quantity, profit or market share, given the predictions provided by economic theory.
Your essay must conform to the following specifications. (Failure to do so will mean your score will be penalised.)
Page limit of 8 pages including appendices, but excluding references & cover sheet (note 8 pages in length is not a target, but a maximum)
Include your student registration number and module code on every page as a header or footer (do not include your name anywhere in your submission)
Include the provided cover sheet as the first page of your submission
Use the font Times New Roman, font size 12
Follow 1.5 line spacing
Follow margin size of 2.54cm (MS Word standard)
Follow Harvard referencing style (see module outline for details)