What is Politics?-subset of human behavior that involves the use of power or influencechange in status quo- imagine a band on firearms, etc. what can you do as an individ-ual? a citizen?1) Voice a complaint (protest, disobedience, legal action, lobbying)2) Exit3) LoyaltyGame Theory: a tool for analyzing strategic situations (a situation where the choice of one “actor” depends on the choices made by the others)- in Game Theory, players or “actors” always do what’s in the best interest, what-ever results in the highest payoutExtensive Form Games: players take turns making decisionNormal Form Games: choices are simultaneous- the game theory map is made of choice nodes (where action is chosen), branches(action is taken), and terminal nodes (end of game possible outcomes)- E = citizen’s exit payoff- 1 = benefit taken from citizen by state- L = state’s gained value from having a loyal citizen who does not exit- C = cost for citizen to use voice (C > 0)- If there is a “credible exit threat”, then 1-C > E > 0, If the state is dependent on itscitizens, then L > 1To solve the game, consider these:Subgame Perfect Equilibrium: assume player chooses action expected to give highest payoff in each stage of the gameUse Backward Induction (look at payoffs, see which choices were taken to get to high-est)List All Actions (what you don’t observe is often more important than what is observed-Remember Thatcher)- results will differ if citizens don’t have a credible exit threat, or if the state is NOT dependent- remember, credible exit threat means:1(benefit maintained by citizen) - C (cost of voice) > E (exiting) > 0- no credible exit threat means:1 (benefit maintained by citizen) -C (cost of voice)> 0 > E (exiting)and even 0-C (using voice, still losing benefit) > E-C (using voice, leaving)- if L < 1, so keeping the benefit is more important than having a loyal citizen (stateis independent), and there is a credible exit threat, citizens leave- mobile/liquid assets, means citizens can take their payoffs with them, more likely to exit- remember that the cost of voice varies by country, could be life or death- some states don’t depend on citizens for revenue, they make enough selling oil
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