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- Consider the following HotellingDowns model. Suppose a large number of people whose policy preferences are distributed between 0 and 1. If policy p E
- Consider the following HotellingDowns model. Suppose a large number of people whose policy preferences are distributed between 0 and 1. If policy p E [0.1] is implemented, a voter with the most preferred position i has utility: u.:2lpil. Therefore. parameter 5' characterizes the most preferred policy of voter 5'. The most preferred policy 2' is not distributed uniformly. The distribution. however. is continuous. which means that the distribution function is smooth and contains no mass points or sudden jumps. Moreover, we know that 40% of the voters have their ideal positions 4' to the left of 0.35, and 45% of voters have their ideal positions 4' to the right of 0.45. More precisely, Pr S 0.35) = 0.4 and Pr( Z 0.45) = 0.45. where Pr(-) denotes the probability that the event as described in the parenthesis happens. ll 0 1 Two purely officeseeking candidates. A and B, each propose a policy platform to compete for election. The one with the largest vote share would win and a coin flip decides in case of a tie. Let 30;. be the policy proposed by candidate A 303 be the policy proposed by candidate B. Except the distribution of voter preferences. the HotellingDown model described here is otherwise standard. Given the information above. which of the following statements regarding the equilibrium may possibly be correct? (A) 42.4 = 0.35. 103 = 0.45 (B) 104 : 0.45. 303 = 0.35 (0104 = 0.5. p3 = 0.5 (D) 104 = 0.35. 10.3 = 0.35 (E) p... = 0.45. 103 : 0.45 (G) 42.4 = 0.4. pg : 0.4 (H) p... = 0.33. 103 = 0.42 (I) 5.4 = 0.4. pg : 0.45 (J) pg. 2 0.45. 303 = 0.5 (K) 5.4 = 0.35. 103 : 0.5 (L) 54:0.p5=1
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