Preference ordering for (a) the Regime, (b) the moderate Religious Party, and (c) the radical Religious Party
Question:
Preference ordering for
(a) the Regime,
(b) the moderate Religious Party, and
(c) the radical Religious Party over the three possible outcomes.
(b) Solve the subgame on the left, where the Religious Party is moderate, as if there were no uncertainty. What is the subgame perfect equilibrium? What is the expected outcome? What are the payoffs that each player receives?
(c) Solve the subgame on the right, where the Religious Party is radical as if there were no uncertainty. What is the subgame perfect equilibrium?
What is the expected outcome?
What are the payoffs that each player receives?
(a) What is the expected payoff for the Regime from "Cancel elections"?
(e) What is the expected payoff for the Regime from "Hold elections"?
(f) Use the expected payoffs from the two previous questions to calculate the critical probability at which the Regime will choose to hold elections rather than cancel them.
(g) If the Regime believes that the Religious Party is moderate with a probability of 0.75, will it choose to hold elections, will it cancel elections, or will it be indifferent between these two actions? Explain.
(h) If the Regime believes that the Religious Party is moderate with a probability of 0.8, will it choose to hold elections, will it cancel elections, or will it be indifferent between these two actions? Explain.
(i) If the Regime believes that the Religious Party is moderate with a probability of 0.5, will it choose to hold elections, will it cancel elections, or will it be indifferent between these two actions? Explain. () If you represented a moderate religious party poised to win the elections, would you want the Regime to believe that your party was moderate or radical?
(k) If you represented a radical religious party poised to win the elections, would you want the Regime to believe that your party was moderate or radical?
(1) If you solved the game correctly, you will find that the Regime will hold elections as long as it believes that the Religious Party is moderate with a high enough probability. If there is some uncertainty on the part of the Regime and you are representing a moderate religious party that wants the elections to go ahead, why might it not be enough for you to simply announce to the Regime that your party is a moderate religious party and not a radical one?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill