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All information shows below, this is the microeconomic game theory question Consider the following political agency model similar to the one we introduced in class.

All information shows below, this is the microeconomic game theory question

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Consider the following political agency model similar to the one we introduced in class. There are two periods, two states of the world, and two policy alternatives: . 2 periods: t = 1, 2. . 2 states of the world: st E {0, 1}, for t = 1, 2. Pr(st = 0) = = and Pr(st = 1) = =, fort = 1, 2. The states in the two periods are independent. . 2 policy alternatives: p E {0, 1}, for t = 1, 2. . Voters do not observe the states but are affected by policy choice: the A, ifp = St fort = 1, 2. 0, if pe # St u = 11+ Buz . Politicians get E from holding office. However, there are 2 types of politicians: i E {c,d}, Pr(i = c) = n - Congruent (c): E+A, ifp = St fort = 1, 2. E. if pe # St - Dissonand): 1 = E, if pt = St fort = 1,2. Etr, ifpist v = vi + Bv2 where r is a private benefit (rent) drawn randomly from a uniform distribution over [0, R] in each period. . is the total utility of a politician over two periods. A politician gets a utility of zero if he or she is not elected. Suppose * = 0.6, E = 5, R =20, and A =9

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