This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy. Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to: -the environment -love and marriage -crime -labor markets -education -politics -sports -business My main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!
3.1. The Public Goods Game
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Из курса от партнера University of Illinois at Urbana-Champaign
Microeconomics Principles
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Public Goods, Common Resources, and Externalities
And so we have arrived at the last week. This course has gone too fast! This module we will be discussing market failures. A market failure is a situation when the market does not do a good job of distributing resources among members of society. In fact, in all of these cases the market IS the problem.
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Dr. José J. Vázquez-CognetClinical Professor
Department of Economics
[music] Hello, we're going to, here to play the public goods game.
It's actually a very famous game that economists have played for many years.
It basically reveals a lot of issues that,um, economists deal with when you
talk about the issue of public goods. So, we're here to play with six
volunteers. We have Jasmine, Trevor, Austin, Jordan,
Gretchen, and Wesley and the game itself is actually pretty straight forward.
I have given each of them, four cards, two red cards, and two, black cards, right?
And you have the red cards and then you have the black cards and each of them have
two of each. In each round, we're going to play a few
rounds, but in each round, they each have to make a really simple decision.
They have to decide on two cards to gift, right?
And if they gift every time they actually gift a red card to me, so they have to
gift two, two cards. Privately.
Every time i give a red card, each of us, each fo them earns one dollar.
So for each red card I get, I give all of them one dollar.
So this is kind of the public account, right, so if I get, if at the end all of
them give me their cards, there are six of them, all are going to, they decide to
give their two red cards... Then everyone will get, what, $12, right.
But they can also say that they don't want to give anything else, and they can just
give me two black cards and keep the red cards themselves.
If they keep the red cards themselves, then the red cards in their hands are
worth $4 each. Alright?
Right. So, so you have four, you can either have
at the end, you can, and then you can add whatever you have to the public account.
Right? So you get the money you have in your hand
plus the public money is whatever you have at the end of that round.
At the end of that round, I want you guys to write, write down how much money you
have, and at the end of, probably, probably four or five rounds I'm going to
pay whoever person, a couple of people I would choose at random, I'm going to pay
that person a percentage of the earnings in cash.
Alright so you make a $100, I pay you let's say 30%, I'll pay you $30, alright?
So you have the probability of earning the money you make in cash at the end of the
day. Make sense?
Do you guys have any questions about what we'll do?
So we're going to play a few rounds and then, we'll see how it goes.
I might interrupt at some point after a few rounds to give you guys a chance to
talk about strategies, but for now, I'll give you a few seconds to think about what
kind of cards you want to give me in the first, in the first movement.
And then I start calling from Jasmine to the, to the left which cards you were.
When you're ready, when you're ready to put a card just put the cards right in
front of your name or right here maybe, maybe right here like this and I'll pick
them up from you. Alright?
You guys know what you want to do? >> Mm-hm.
>> Alright Jasmine, so why don't we go for you, with you first?
Just put two cards, the cards you want to give, you put in the front.
Like this, all right and try not to show it to anyone.
All right, all right, Wesley. Okay, so, let me see what we have here.
One. So you can add yourself $6.00.
That's the amount of money in the public account.
So whatever cards, do you have direct cards, those are worth $4.00 and you can
add $6.00 to that. And then you can collect your cards and
think about what you want to do next. So the way it works, if you, if you gave
both of your red cards, you have $6. If you kept your red cards, both of them,
instead of having $6, you'd have 6 plus 8 you have $14, right?
So, you know, use that information as you want to make the second choice in the
second round. >> [CROSSTALK]So if he gave one red and
one black, then you have $10 Exactly. So, if you get one you all, everyone
always gets $6 if you kept one red you'll end up with $10 exactly.
Makes sense any questions on alright so why don't we start this way now Westley
why don't you take you put your two cards there.
Alright. Mm-hm.
So, you can add yourself $2 for, in the public account right now.
So that's $2 plus whatever red cards you actually have in your hand.
There's two dollars plus whatever the red cards you have, so you have two red cards.
Then you end up with $10, I think right? And if you have one red card, then you
have $6. So a lot less contributions to the public
account in the second round. Alright, you can pick your cards I don't
know if you are getting the gist of it, right?
But, but if you want to since you might all be in this together at the end.
If you want to strategize amongst yourselves about what to do in the third
round that's up to you. Do you think there's any strategy?
Common strategy that you should follow? >> All depends on who wins the cash prize,
I guess. >> <<[LAUGH] It's just random.
>> [laugh] Well, let me give you an example, right?
So if everyone contributes, right? Then, how much money you have at the end?
If everyone contributes their two cards, how much money you have in that round?
Twelve, alright? And if, if no one contributes,how much
money you have? >> Each person has eight.
>> So it's a good thing to contribute, right?
So. >> So I'd say everyone contribute.
[laugh] ... >> Alright.
Alright, well let's, let's, let's see, let's see what you guys are, let's, let's
play another round. Let's start with you, Austin, in the
middle, and then we go this way and this way.
>> Alright. >> Are sure you're going this way?
>> Yeah, just put in my out. Yeah, that's good.
>> [music] that was I think that was in. Let me count again.
That was seven. $7.00, so more contributions to the, so
let's see, so seven. And now I'm going to be a little, sneaky
here. So since you didn't contribute anything,
right, you have seven, and ... >> Did you have to point it out?
That's right, wait a sec. What you contribute, two?
So you, you get $7 only. >> Yeah.
You get, you kept one red, one black card. And you get one.
Huh? >> I did one of each.
One of each, right. So you kept, if you kept the black card
then you if you got two black cards you get seven if you get the red cards then
you get a little more. >> Wait so if you put down two red cards,
what would you get? If you put two red cards then you get $7.
Alright. But if you kept the red cards you get $7
plus the two red cards you have that will be $15.
>> No matter what you get $7. >> No matter what you get the $7
[inaudible] so if you keep the[INAUDIBLE] red cards,[INAUDIBLE]?
>> That's it, if you kept the two red cards, you got four for each.
$8. Yeah.
Plus the seven cards that you, you always, you always get the public money no matter
if you contributed or not. Alright?
Let's play another round, and then I'm going to, I'm going to change something
else here. Let's play another round and see if I.
Are these yours? >> Yeah.
>> Are you going to play those? >> I think I am.
>> Alright. That's five.
We got five this time. $5 in the public account.
[music] Alright, so pick up your cards so now let me let me try to do it a little,
well actually, before I do it a little differently let me ask you guys.
So what, have you guys been using any particular strategy?
Austin, what are you doing? >> I always put a red in You always put a
red in and keep one for yourself? >> Yeah Ok.
Alright, why are you doing that? >> Because you get more money from the
public than you do from yourself. >> Ok so you're kind of half-contributing
and half-- ok, is anyone doing anything particularly different?
What are you doing Wesley? ..
Tommy's just being a horrible meanie right?
>> [laugh] Well, but the thing is that if you keep your red cards, then you get the
benefit offered everyone, right? So it's, you know, in a way, there's
really no, very little incentive to give a red card.
So why don't we do it now publicly, right? >> So I want you to put the 2 cards Show
him what you're doing. So you're going to show everyone what
you're doing. Right?
And then put your cards ... >> [laugh].
>> Put your two cards, alright? So you cannot put them down you have to
put them facing up. Alright?
Go for it. Alright.
You are one and one. Let's see what you want to do, Wesley,
then. Okay.
>> [laugh] >> Peer pressure worked. Alright.
Alright. So we, you have, look how much we have.
We have one, two, a four, a five, six. This is the most we've had, we have eight.
What do we, so how can we have so much in this, now $8 in the public account?
So public account is actually a, a, a good, contributing to the public account
individually doesn't make a lot of sense. [unknown] Right?
But when you have peer pressure, you might actually make a little more sense.
Okay, so why don't we tally up what you have and let's see who actually end up
with the most. So, what I'm going to do.
I'm going to pick 2 people and then you're going to tell me how much money you made,
and then I'm going to pay you in cash per that.
If we're going to do this, we're going to do it this way.
Kind of randomly, right? We're now seeing.
And it'd probably be fair to say that I will pay you 20% of your earnings,
alright. I will pay you 20%.
Hopefully that won't be more than the money I have.
Alright, so the first person is... Wesley.
[laugh] How much money you make? >> I have 52.
>> Really? Yeah.
>> [inaudible] Alright, so I'll pay you 20% of that.
And the next person, kick Wesley out so you have a higher probability of getting
that money. Gretchen, that's you.
How much money you have? >> 50.
>> 50? Alright.
So that's you. And so I'll pay you 20% of that.
Now let me ask, just have, how much money did you make?
>> 38. >> And how much money you?
>> 44. >> 52.
>> 52. >> 36.
>> 36. Alright.
So you have the, the cooperator here, right?
[laugh] She made a lot more that you have actually, you made a lot more than if you
have actually done Not giving anything, but unfortunately, the people who
contributed nothing, a lot less, and you actually made a lot more.
So this is exactly what happens when we have a public good, right, in which, if,
it's better for everyone to have something like national defense, right.
But, but there's no incentive for me to contribute to have national defense
because if all you guys pay for national defense there's no way for me to not be
benefited by natural defense. So, so the problem with a public good is
that it's a paradox, right? It's better for all of you to cooperate,
but it's better for one person to free rude on all the other ones.
Eventually, you all, we're doing exactly the same thing.
And then this is a segment that will never be provided by the market because everyone
will behave in kind of the same way. Alright.
Okay, so that calls out, we come back after the game to talk a little bit more
about different scenarios of the game and understand a little bit more about public
goods. >> Thank you guys a lot, and I'll pay
your, your earnings after, off camera. ...
>> Produced by OCE Atlas Digital Media at the University of Illinois Urbana-Champain
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