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?
1.2 In which case the voters should re-elect the incumbent if they observe A?
Now, assume that there are two possible states: 0 and 1. State 0 is exactly as above. State 1 is di erent, 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?
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 is π = 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 an a incumbent chooses A when the state is θA and B when the state is θB . If you observe A being chosen, what is the probability that the incumbent is of type a?
2.2 With the same assumption, if you observe B being chosen, what is the probability that the incumbent is of type a?
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 payo of R > 0 if reelected and 0 otherwise.
2.3 Under this assumption, which alternative would a type a incumbent choose?
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 xed term and are not accountable to voters. Explain very brie y (a few lines) pros and cons of po- litical accountability.
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 between 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 θi 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 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.
4.3 What do the voters believe about the incumbent's type if they observe policy choice A? Use Bayes' Rule.
4.4 If voters only care about selecting type g politicians, how should they vote to maximise their chances of a type g politician?
4.5 If type g politicians are purely office-motivated, which of these two strategies should they use?
5 How can campaign advertising affect what vot- ers believe about a candidate?
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)
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 Confiict
- Qian, Nunn (2014) in order to answer this question (100 words)