A Small Community Has 10 People, Each of Whom Has

question 12

Multiple Choice

A small community has 10 people, each of whom has a wealth of $5,000.Each individual must choose whether to contribute $300 or $0 to the support of public entertainment for their community.The money value of the benefit that a person gets from this public entertainment is b times the total amount of money contributed by individuals in the community.

• A)This game has a dominant strategy equilibrium in which nobody contributes anything for public entertainment.
• B)If 10b > 1, everybody is better off if all contribute to the public entertainment fund than if nobody contributes, but if 10b <1, everybody is better off if nobody contributes than if all contribute.
• C)If 10b > 1, there is a dominant strategy equilibrium in which everybody contributes.
• D)Everybody is worse off if all contribute than if nobody contributes if b> 1, but if b < 1, everybody is better off if nobody contributes.
• E)In order for there to be a dominant strategy equilibrium in which all contribute, it must be that b > 10.

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.

Overconfidence

A cognitive bias where an individual's subjective confidence in their own abilities is greater than their objective accuracy.

Representativeness Heuristic

A mental shortcut that involves making a decision based on how closely a new situation or object resembles a prototype or typical case.

Fixation

The inability to see a problem from a new perspective, by employing a different mental set.