ECON3106 Politics and Economics Exercises
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ECON3106 Politics and Economics
Exercises
August 8, 2019
1 Bayes'Politics
An incumbent politician is of type g with probability π . Voters want to re-elect her only if she is g but cannot observe it directly. Yet, they know that a g politician would choose alternative A with probability p. Any other type of politician chooses A with probability q.
1.1 What is the probability that an incumbent who has chosen A is of type g?
By Bayes' rule,
1.2 In which case the voters should re-elect the incumbent if they observe A?
Voters want to relect only if the incumbent is g. Thus, they re-elect if Pr(g | alternative chosen)≥ π . Thus, they re-elect after observing A if
That is, they re-elect if g incumbents are more likely to choose A than notg incumbents.
Now, assume that there are two possible states: 0 and 1. State 0 is exactly as above. State 1 is different, because in state 1 a g politician never chooses A (other politicians stlill choose A with probability q). The probability of state 0
is r.
1.3 How would your two previous answers change?
Answer 2.1 becomes:
Thus, answe 2.2 becomes pr≥q: the total probability of a g incumbent choosing A must be higher than the total probability of notg incumbents choosing A, including the fact that g incumbents choose A only in state 0.
2 Bayes Politics II
An incumbent chooses between two alternatives, A and B. There are two possi- ble states:θA ans θB. the probability of state θA isπ=Pr(θA). The incumbent knows which state is true, but the voters cannot observe the state. The incum- bent can be of two types: a and b. A b incumbent always chooses B.
2.1 Assume that
is θA and B chosen, what of type a?
By Bayes rule
an a incumbent chooses
when the state is θB. If is the probability that
A when the state
you observe A being
the incumbent is
= 1.
2.2 With the same assumption, if you observe B being chosen, what is the probability that the incumbent is of type a?
By Bayes rule
Now, assume that the voters always reelect the incumbent if they observe A. Also, the incumbent of type a cares only about being reelected: he gets a payoff of R>0 if reelected and 0 otherwise.
2.3 Under this assumption, which alternative would a type
a incumbent choose?
Since he cares only about being reelected, he will choose alternative A.Indeed, in both states, the expected payoff of choosing A is R, while the expected payoff of choosing B is 0<R.
3 "In democracy, politicians are accountable to voters, who can choose to replace them when an election comes. Some judges and central bankers are instead appointed for a fixed term and are not accountable to voters." Explain very briefly (a few lines) pros and cons of po- litical accountability.
When politicians are accountable to voters, then re-election motives might in- duce politicians who do not share the preferences of the voters to choose what is best for the voters. On the other hand, if voters are poorly informed, then re- election motives might induce politicians who share the preferences of the voter to choose what the voters believe is best for themselves, even if the politician knows better.
4 Bayes' Rule and Pandering
There are two states of the world,θ ∈ {θA,θB}. Although voters cannot observe the state, they know that P(θ=θA)= 0.8. The incumbent knows the state and must decide bet ween policies A and B. Politicians can be of type b or type g with equal probability. Type b politicians always choose i to mismatch with θ; whereas type g always chooses policy A.
4.1 What do voters believe about the incumbent's type if
they observe policy choice A? Use Bayes'Rule.
4.2 What do the voters believe about the incumbent's type if they observe policy choice B? Use Bayes'Rule.
=0
4.3 If voters only care about selecting type g politicians,
how should they vote to maximise their chances of a type g politician? Note that a comprehensive strat- egy for voting should explain what to do depending on what the incumbent has chosen.
Voters should re-elect if and only if the incumbent chose A. If the incumbent chose B, they are type b so we are better off with a new, random candidate.
Now suppose that type g politicians choose A if and only if the state is θA (and B otherwise).
4.4 'What do the voters believe about the incumbent's type if they observe policy choice A? Use Bayes'Rule.
=0.8>0.5
4.5 What do the voters believe about the incumbent's type if they observe policy choice B? Use Bayes'Rule.
=0.2<0.5
4.6 If voters only care about selecting type g politicians,
how should they vote to maximise their chances of a
type g politician?
Voters should re-elect if and only if the incumbent chose A. Notice that if we were to re-elect if they choose B, we get a type g politician with probability 0.2, but a new, random candidate is type g with probability 0.5, so we prefer a new candidate.
4.7 If type g politicians are purely office-motivated, which of these two strategies should they use?
They should always choose policy A, as they will always be re-elected, whereas if they choose B in state θB, they will not be re-elected with probability 0.2.
5 How can campaign advertising affect what vot- ers believe about a candidate?
If advertising is informative (i.e. a high enough level of advertising reveals a politician's true type), and not too expensive compared to the payoffs of inter- ested lobby groups, then there is an equilibrium in which only good policians are paid to reveal their type by lobby groups. In this equilibrium, voters can distin- guish bet ween good politicians who have revealed their type, and bad politicians who have not.
If advertising is not informative but voters can observe the amount spent by lobby groups, and with some probability observe the politician's actual type, then the advertising can act as a costly signal that the politician is of good type. The lobby group would only provide funding for a good politician because they are likely to be worse off by supporting a bad politician because they might be found out.
It might also be good, but not necessary, to discuss the implications of Political Advertising and Election Results (Spenkuch and Toniatti (2018)) and Leveling the playing ffeld: How campaign advertising can help non-dominant parties (Larreguy, Marshall and Snyder (2018)), though they are not strictly about voter's beliefs but rather the effect of political advertising on voters in general.
6 Why should better paid politicians affect the selection of politicians and the behavior of elected politicians once in office? You can base your
answer on the results found in the following paper: Motivating Politicians: The Impacts of Monetary Incentives on Quality and Perfor- mance - Ferraz and Finan (2009)(100 words)
When deciding whether to run as a candidate or not, individuals compare the benefits from the office with the benefits they have if they remain outside of politics. When the salary goes up, the benefits from holding office increase, making even individuals with higher benefits outside of politics run as a candi- date. Once in office better paid politicians should change their behavior because now they have more to lose if the voters decide to vote them out of office.
7 NGOs that provide food and other supplies to countries in need often worry they not helping but hurting the recipients of help. How can aid of this type be counterproductive? Use the results found in US Food Aid and Civil Conflict
- Qian, Nunn(2014)in order to answer this question (100 words)
In US Food Aid and Civil Conflict the authors show that wheat food aid coming from the US increases the likelihood of conflict for the recipient of the aid. This may happen because of the rapacity effect. After a country receives food aid there is more to gain from controlling certain territory or by holding power. Because of this reason is more likely that certain actors will use force in order to capture these gains.
2023-08-14