Essay On Positional Externalities

Instructions

Utilizing the file attached above, which contains the matrix below, devise a strategic game for a real-life situation between two players that leads to a prisoner’s dilemma because of positional externalities. Make sure that you label who the players are, devise and label the two strategies, and type-in the accompanying payoffs in the matrix that have been appropriately underlined to outline each player’s best responses. You need to then write an essay describing the real life situation and the details of your game and why the devised payoffs are appropriate. In addition, you need to detail each player’s best responses in the game, given what the opposing player is doing, and you need to describe how the strategies lead to a prisoner’s dilemma because of inherent positional externalities embedded within the game. The essay needs to be a minimum of three quarters (3/4) of a page (excluding the matrix). The example that you create doesn’t have to necessarily pertain to purely business or economic matters. You can create and come up with any situation that you choose. *******However, please note that you can not use an example where prisoner’s or other individuals are deciding to either confess or keep quiet in the game. I want you to devise an original game. ********

In order to come up with some ideas and get a sense of what a positional externality is and how it differs from negative and positive externalities, please read the following papers by the economist Robert Frank:

Excerpt

Politics is an important aspect of social growth. When it comes to directing the growth of the community, political growth certainly ties in with the demands of the public and the expectations of every element existing within the circle. This is the reason why during the campaign season, the work of campaign managers of different candidates play a great role on how much the public could be convinced on what they are ready to offer as well as how they are going to provide all expectations and demands of the people. In the sample presented above, it is obvious how political competition actually creates a definitive impact on how the values and demands of the people could be adjusted according to how candidates present themselves as representation of their personal goals and dreams. The connection established between campaign managers and the entities they want to make the partnership with in order to establish the direction of the campaign until the Election Day is critical to the success of the candidates they want to vie for. In the process of establishing the connection, both parties involved need to compromise on certain values so to make sure that the partnership would be balanced whether the candidate wins or not.

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