Exit, Voice, and Loyalty

question 19

Multiple Choice

Exit, Voice, and Loyalty
Below is the Exit, Voice, and Loyalty game between the state and the citizen. Recall that E is the payoff that the citizen gets when she exits, L is the payoff that the state gets from retaining a loyal citizen, 0 is the payoff that the citizen gets from remaining loyal, and C is the cost that the citizen must pay for using voice.
Let E = 0.5, let L > 1, and let C = 0.75.

-What are the equilibrium payoffs for each player if you use these payoff values?

• A) 0; 1 + L
• B) .25; 1
• C) −.5; 1 + L
• D) −.25; 1
• E) .5; 1

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Definitions:

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded in a market.

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Air Pollutants

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Equilibrium Price

The price at which the quantity of goods supplied equals the quantity of goods demanded in a market.