Economics of Crime
Homework #6: Game Theory & Public Policy
Game Theory
How does the Mafia’s “code of silence,” which promises r3etribution against family members of Mafia members who “rat” on other Mafia members, work to prevent the prisoner’s dilemma? What must the government do to counter this?
You and a stranger witness a person bleeding to death. You both know the other person has seen it as well. Design a static (simultaneous) game that models whether you call 911.
The United States tries to get other countries to follow its lead in the “war against drugs” using trade sanctions. This policy does not consider the rights of foreign governments to set their own policies. The government of Jamaica, knowing that legalization of marijuana would be beneficial from a public policy standpoint, if all other things remained the same, would like to change its laws so that marijuana possession and production are allowed. The payoffs to both countries are presented in the game below. Determine all Nash equilibria for this game.
USA
Impose Sanctions
Free Trade
Jamaica
Grow Marijuana
(0, -50)
(200, -25)
Criminalize
(-100, 50)
(0, 0)
Public Policy
Describe the difference between statistical discrimination and preference-based discrimination. How can hit rates be used to determine the difference?
What is the incapacitation effect discussed in the lecture? What are the policy implications of the research findings related to the incapacitation effect?
Imagine you are a judge presiding over a racial discrimination case. The plaintiff is a man of Middle Eastern descent accusing the United States Customs Service of discriminatory practices in their non-routine searches (x-ray and/or strip searches) at John Wayne Airport. He claims that the airport employees were biased in their selection of him and other people that appear to be Middle Eastern. You have the most recent annual data on non-routine searches conducted at John Wayne airport in the table below as supporting evidence. Based on the data, what do you conclude?
# of successful searches
Total # of searches
White men
10,000
50,000
Black men
27,000
90,000
Hispanic men
13,200
60,000
Middle Eastern men
15,600
120,000
Asian men
5,700
30,000
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