A trust game shown in Exhibit 13.13 is a sequential prisoners' dilemma. This means that it is likely that the outcome of the game is not socially efficient. What factors could cause this equilibrium to be different in real life?
What will be an ideal response?
An important factor that makes the equilibrium socially efficient in trust games is reputational concerns; if the game is played several times, the players might attempt to develop a reputation as someone who can be trusted. If a game is repeated, it makes sense to play nicely as the other player may reciprocate your behavior. This long-run strategy may shed light on the kinds of interactions we often observe in the real world where people trust each other even when it's not in their immediate best interest to do so.
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Which of the following statements is true?
a. Goods are scarcer than services in an economy. b. Goods are scarce for neither the poor nor the rich. c. Goods are scarce for both the poor and the rich. d. Goods are scarce for the poor but not for the rich. e. Goods are scarce for the rich but not for the poor.
In case of endogenous sample selection, OLS is unbiased but consistent.
Answer the following statement true (T) or false (F)