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Monday, January 22, 2007

Microeconomics quiz of the week (delayed)

From last Friday's Professorjournal.com:
The article reports on the proliferation of new websites dedicated to condemning public offenses ranging from bad parking (Caughtya.org) and leering (HollaBackNYC.com) to littering (LitterButt.com) and general bad behavior (RudePeople.com). "Helping drive the exposes are a crop of entrepreneurs who hope to sell advertising and subscriptions. One site that lets people identify bad drivers is about to offer a $5 monthly service, for people to register several of their own plate numbers and receive notices if they are cited by other drivers. But the traffic and commercial prospects for many of the sites are so limited that clearly there is something else at work. The embrace of the Web to expose trivial transgressions in part represents a return to shame as a check on social behavior, says Henry Jenkins, director of the comparative media studies program at the Massachusetts Institute of Technology. Some academics believe shame became less powerful as a control over everyday interactions with strangers in all but very small neighborhoods or social groups, as people moved to big cities or impersonal suburbs where they existed more anonymously."

The article reports that public shaming could be used as a tool for social betterment. "In a paper in the November issue of the New York University Law Review, Lior Strahilevitz, a law professor at the University of Chicago, suggested that roads would be safer if every car had a 'How's My Driving?' placard on the bumper asking other drivers to report bad behavior."

The article recognizes the important point that while there is accountability of those taking the offensive actions, there is no accountability of those making the reports. One offender, whose actions are reported online, states, "You can just go online and say whatever you want whether it's factual or not."

1.) Construct a simple model in which person A decides whether to commit an offensive action. If A commits the offense, then B decides whether to post online a picture of the offensive. If A commits and B posts, the payoffs are 0 for A and 2 for B. If A commits and B does not post, then A receives 3 and B receives 1. If A does not commit, then A's payoff is 2 and B's is 3. Does the potential threat of posting the offense online deter A from committing the offense? What is the subgame perfect equilibrium?

2.) Suppose alternatively that if A does not commit, then B has the option to slanderously post a doctored picture. If A does not commit and B does not post, then A's payoff is 2 and B's is 3. If A does not commit and B posts, then A's payoff is -1 and B's is 4. What is the subgame perfect equilibrium?

3.) The article raises the issue of whether those who post online complaints are accountable for their posts. Does the possibility of posting false accounts reduce the effectiveness of the reports in deterring offensive actions?

4.) Does the easy spread of a person's reputation for the type of actions he or she takes encourage the person to take socially-acceptable actions?

Reviewed By: James Dearden, Lehigh University

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