Deck 17: Conflict, Negotiation and Group Choice

Question 1

The total of individual payoffs in the grand coalition must be less than the value the coalition earns.

Answer 1

False

Question 2

When parties are risk averse, cases with more at stake are less likely to settle outside court.

Answer 2

False

Question 3

The difference between the buyer's opportunity cost and the seller's valuation defines the zone of agreement in which the agreement will benefit both parties.

Answer 3

False

Question 4

The mutually understood standards that people follow from experience are called norms.

Question 5

Which of the following is an example of a zero-sum game?

A)Jill decides to buy a television set from Jack for $500.
B)Angela buys a jacket worth $30 from the apparel store near her apartment.
C)Rachel decides to buy Sarah's couch and is willing to pay whatever price Sarah might ask for it.
D)Joanna buys a camera at a Thanksgiving sale and gets a tripod free.

Question 6

_____ is a process in which parties initially in disagreement attempt to reach an agreement.

A)Strategic voting
B)Negotiation
C)Borda count
D)Median voting

Question 7

Researchers have found numerous significant relationships between final prices agreed upon by bargainers and their personal characteristics such as education, income, and age.

Question 8

There is no mechanism of collective choice that is always immune to misrepresentation of preferences by voters.

Question 9

Terry wants to sell his car and the lowest price he is willing to accept is $3,000.Alice likes the car and is willing to pay at most $4,000 for it.They begin to negotiate to arrive at a price.Which of the following statements will be true?

A)They are playing a zero-sum game.
B)The higher the price they agree on, the greater the benefit to both.
C)The longer they take to arrive at an agreed price, the lower the benefit to them.
D)They are playing a positive-sum game where their benefits add up to $1,000.

Question 10

On the boundary of the utility possibility frontier, if the utility of one person increases, that of the other will decline.

Question 11

The utility possibility frontier helps to predict the exact bargain two parties will arrive at.

Question 12

The median voter model and the borda count are different names for the same methods of reaching a group decision.

Question 13

A house is a private good because it is nonrival and nonexcludable.

Question 14

In which of the following cases are disputes more likely to be settled by negotiations than by court cases?

A)When the parties involved are risk averse
B)When time is not an important factor
C)When court costs are low
D)When parties have asymmetric beliefs about facts

Question 15

Terry wants to sell his car and the lowest price he is willing to accept is $3,000.Alice likes the car and is willing to pay at most $4,000 for it.What is the headroom for them?

A)Prices up to $1,000
B)Price range between $3,000 and $4,000
C)Prices above $4,000
D)Prices below $3,000

Question 16

If A>B and B>C do not imply A>C, where > means "preferred to", then preferences are intransitive.

Question 17

An empty core is more likely if the individuals in a group own highly complementary resources.

Question 18

The value of goods produced by coalition A is worth $50, and by coalition B is worth $30.If together they produce $100 of them, the game is called superadditive.

Question 19

A lawyer's ability to understand a client's legal situation and his professional norms may improve the outcome of a negotiation with another attorney, relative to the outcome if the client bargained for herself.

Question 20

When the core is empty, the proposals and counter proposals of the individuals can cycle without ever settling into an unblockable allocation.

Question 21

Alex's production is worth $60, Harry's is worth $40, Rob's is worth $40, and Julia's is worth $55.They decide to combine their resources and produce together.For this to be a superadditive game, which of the following conditions must hold?

A)They should be able to produce more in groups of two than what they can produce together.
B)Their combined production must exceed the total they can individually produce.
C)Their resources must be perfect substitutes.
D)Their resources must be perfect complements.

Question 22

A characteristic function is:

A)one that identifies negotiations which depend on the characteristics of the bargainers.
B)one that gives the value each possible coalition of a group's members can create by operating independently.
C)one that identifies the most beneficial price for the buyer involved in a transaction.
D)one that identifies the most beneficial price for the seller involved in a transaction.

Question 23

Zach and Laura want to buy cars and go to the same dealer.The dealer perceives Zach's price elasticity of demand to be lower than Laura's.Which of the following statements will be true?

A)The dealer will quote the same price to both since individual characteristics do not matter.
B)The dealer will quote a higher price to Laura because of her gender.
C)The dealer will quote a higher price to Zach because his demand is less elastic.
D)The dealer will quote different prices to both according to their bargaining tactics.

Question 24

Utility possibility frontier shows:

A)the possible combinations of utility that an efficient bargain can get the negotiating parties.
B)the exact bargain at which the negotiating parties eventually arrive.
C)the highest utility each negotiating party can individually achieve.
D)the possible combinations that maximize payoffs to the negotiating parties.

Question 25

Which of the following is a characteristic of the core?

A)The core is the set of all allocations that cannot be blocked.
B)The core is the set of all allocations where the value realized by the members of the coalition are same as what they can realize individually form the core.
C)Cores are broken when one or more participants withdraw from the coalition.
D)Any allocation that makes even one of the parties to the transaction better off is in the core.

Question 26

The halfway-point between the buyer's valuation and the seller's opportunity cost is:

A)sometimes a focal point.
B)where the two parties invariably agree to transact.
C)outside the core.
D)inside the utility possibility frontier.

Question 27

Identify the correct statement from the following.

A)Good faith bargaining implies the seller will never decrease the price for a particular buyer.
B)Distrust is the norm when electricity producers negotiate a deal to exchange power by misrepresenting their costs.
C)Poker is the exception where norms do not come into play.
D)Good faith bargaining norms vary among different types of transactions.

Question 28

Elizabeth's opportunity cost of selling a widget is $18, while Jess values it at $27.Identify the correct statement from the following.

A)Jess can threaten to go to another seller if the transaction benefits Elizabeth more than her.
B)The core is of the zone of agreement.
C)The core consists of prices above $27, which benefits both parties.
D)Elizabeth can threaten to go to another seller if the transaction benefits Jess more than her.

Question 29

In which of the following are the parties likely to avail themselves of norms for the transaction?

A)When transactions are repeated
B)When the stakes for both parties are high
C)When court costs are low
D)When information costs are high

Question 30

Identify the statement which is true about bargaining.

A)There is a strong relationship between bargaining power and education.
B)The distribution of prices within the zone of agreement has a high standard deviation.
C)Average final prices are often near the halfway mark between valuation and opportunity cost and there is hardly any deviation from this.
D)There is a strong relationship between bargaining power and income.

Question 31

The mutually understood customs the two parties involved in a transaction follow from experience are known as _____.

A)focal points
B)norms
C)cores
D)strategies

Question 32

Given that the value of individual production of Carol and Tessie is zero, while their combined production is positive, we may conclude that:

A)any subset of the grand coalition can credibly threaten to block the coalition.
B)the coalition is not individually rational.
C)the core is empty.
D)any allocation of payoffs from the coalition will lie within the core.

Question 33

A and B form a coalition and share the value of the payoffs it produces.Their coalition is individually rational if:

A)the core is blocked.
B)individual payoffs exceed the respective values produced by A and B.
C)payoffs to both are equal to their respective values.
D)the core is empty.

Question 34

Any point within the utility possibility frontier is:

A)unachievable
B)efficient
C)achievable but inefficient
D)unachievable but efficient

Question 35

A conclusion from the study of automobile markets by Allen Jung of the University of Chicago was that:

A)the more experienced buyers got better deals.
B)dealer characteristics had considerable influence on the prices they offered.
C)variation in the offered price by dealers of cars was uniform.
D)there was little or no difference between the average prices quoted to different types of buyers.

Question 36

Which of the following statements is true about the utility possibility frontier (UPF) for two people trying to strike a deal?

A)It limits the moves two individuals can make at different stages of the game.
B)It tells us how the point on the UPF that they finally reach might differ with their bargaining tactics.
C)It predicts the exact point where the two bargainers will end up irrespective of their bargaining tactics.
D)It tells us how the point on the UPF that they finally reach might differ with their personal characteristics

Question 37

Identify the correct statement about repeated negotiations from the following.

A)Patterns in repeated negotiations can persist over time but are usually region-specific.
B)The payoff from repeated negotiations is higher than that from negotiations which are unlikely to be repeated.
C)Experience can help the parties understand each other's positions when negotiations involve previously unencountered issues.
D)The greater the experience of the buyer the higher the benefits he realizes from a repeated negotiation.

Question 38

Assume that the characteristic functions for individuals 1,2, and 3 are given by V(1) = $20, V(2) = $16, and V(3) = $10 respectively, and value created by the coalition V(1,2,3) = $60.If the payoff to individual 1 is $30, and that to individuals 2 and 3 is $15 each, which of the following statements is true?

A)The given allocation is within the core.
B)2 and 3 will withdraw from the coalition.
C)2 will block the imputation.
D)This allocation is individually rational for all.

Question 39

An advantage of settling disputes via arbitration rather than court cases is that:

A)the risk of an incorrect decision in the former case is negligible.
B)the former is inexpensive and binding.
C)the former is more likely to grant a lenient decision.
D)the former may be more knowledgeable than an uninformed jury.

Question 40

Alex's production is worth $60 and Harry's is worth $40.They decide to form a coalition and produce together such that their combined production is worth $135.What is the maximum benefit Alex can earn while ensuring Harry does not leave the coalition?

A)$75
B)$96
C)$77.5
D)$94

Question 41

What is the core of a negotiation involving many parties?

Question 42

A, B, and C have the following preferences for fruits:
A: apples > bananas > peaches
B: bananas > apples > peaches
C: apples > peaches > bananas
Find the median voter's preference, if any, using a two-phase election.

A)Preferences are intransitive.
B)Apples
C)Bananas
D)Peaches

Question 43

A car purchased by you is rival because:

A)you can prevent others from using your car.
B)it has many competitors.
C)your use of this car makes it unavailable for others.
D)it is nonexcludable.

Question 44

The differences that people settle by voting are most likely to include:

A)issues that affect few people.
B)decisions that need to be taken at a short notice.
C)decisions that are divisible.
D)public goods.

Question 45

Economic reasoning suggests that individuals should spend little time learning about election candidates and other electoral issues because:

A)marginal benefit is zero.
B)the information cost is too high compared to the benefit to the individual.
C)information is easily available.
D)the result of the election are unlikely to have a serious impact on a market-driven economy.

Question 46

What is a utility possibility frontier?

Question 47

A good which is nonexcludable and nonrival is called:

A)a public good.
B)a marketable good.
C)a private good.
D)a consumer good.

Question 48

A private good is:

A)excludable and nonrival.
B)nonexcludable and rival.
C)nonexcludable and nonrival.
D)excludable and rival.

Question 49

Identify the public good in the following.

A)A small library with a limited collection of books
B)A crowded children's park in your neighborhood
C)The visit to a museum which charges a nominal entry fee
D)The scenic view of the ocean from a beach

Question 50

A, B, and C have the following preferences for fruits:
A: apples > bananas > peaches > pineapples
B: bananas > apples > pineapples > peaches
C: apples > pineapples > peaches > bananas
Use the Borda Count method to determine the most preferred fruit.

A)Apples
B)Bananas
C)Peaches
D)Pineapples

Question 51

Which of the following statements about voting is NOT true?

A)Voting theory posits that a majority vote by itself may indicate nothing at all about society's preferences.
B)In those situations where voting does occur, it can have imperfections, just like markets might.
C)There will be occasions when voters can advance their individual interests by misrepresenting their preferences or purchasing each other's votes.
D)It is possible to devise a voting method in which the outcomes always have certain desirable properties for all possible sets of voter preferences.

Question 52

Assume that the characteristic functions of different coalitions in a three-person group are given by: V(1,2,3) = $60
V(1,2) = $40, V(2,3) = $30, and V(1,3) = $35.
The values created by the individuals separately are given by:
V(1) = $20, V(2) = $16, V(3) = $10.
Which of the following allocations will lie within the core?

A)Payoffs to individuals 1,2, and 3 are $21, $17,and $22 respectively.
B)Payoffs to individuals 1,2, and 3 are $31, $17, and $12 respectively.
C)Payoffs to individuals 1,2, and 3 are $21, $26, and $13 respectively.
D)Payoffs to individuals 1,2, and 3 are $25, $18, and $17 respectively.

Question 53

Which of the following statements is true about voting results if preferences are intransitive?

A)The result of voting never reflects majority preferences.
B)It is impossible to predict the outcome when preferences are intransitive.
C)The person who sets the agenda (sequence of votes) may be able to control the outcome.
D)Only a Borda Count yields a unique result when preferences are intransitive.

Question 54

Which of the following statements is true about public goods?

A)They are always produced by the government.
B)The market-determined output is efficient.
C)The government can hire a private entity to produce a public good.
D)Nonexcludability is sufficient condition for a good to classified as a public good.

Question 55

Differentiate between norms and focal points.

Question 56

Which of the following statements is true about empty cores?

A)It is individually rational to form coalitions when cores are empty.
B)There are no unblockable payoff allocations.
C)The only way to prevent blocking is side payments among coalition members.
D)Empty cores leave each person with payoff just equal to their production values.

Question 57

What aspects of bargaining can affect market outcomes?

Question 58

Assume that the characteristic function of a coalition between three individuals named 1,2, and 3 is V(1,2,3) = $60; while V(1) = $20, V(2) = $16, and V(3) = $10, where V(i) is the value created by individual i.Which of the following allocations will lie within the core?

A)Payoffs to individuals 1,2, and 3 are $19, $35, and $6 respectively.
B)Payoffs to individuals 1,2, and 3 are $30, $18, and $12 respectively.
C)Payoffs to individuals 1,2, and 3 are $32, $20, and $8 respectively.
D)Payoffs to individuals 1,2, and 3 are $28, $15, and $17 respectively.

Question 59

Public goods are characterized by the:

A)free-rider problem.
B)adverse selection problem.
C)principal-agent problem.
D)moral-hazard problem.

Question 60

Explain the concept of an empty core.

Question 61

What does an empty core signify about the resources of the negotiators?

Question 62

Explain the significance of voting with suitable examples.

Question 63

Identify some of the salient features of voting as a method of determining the majority preference.

Question 64

In what possible ways can the production of public goods be funded?

Question 65

How can the theory of the core be used to explain the functioning of oligopolistic markets.

Question 66

How is the production of public goods funded?

Question 67

What characteristics distinguish private goods from public goods?

Question 68

Identify the disadvantage of public goods.