How the incentives defect the prisoner’s dilemma
The game at which every player holds a strategic dominant, and each contributes to the play, is Prisoner’s dilemma. If every player has a sufficient payoff would be smaller than the dominant strategy. For instance, an example of a prisoner’s dilemma is Military arms because, in any fight, both fighters often lose the battle. Although a single side may claim victory, losses are experienced, such as destruction, deaths, and other societal harms to the assets.
Examples of negative externalities
Negative externality happens when the industrial action harms other people, while positive externality occurs when people are being helped when industrial action takes place. Two examples of negative externalities; Water pollution and air pollution
In negative externalities, a government can internalize, force the producer through taxation of products when the price is spilled over by the production, and the tax could consequently increase the manufacturing of the product’s price. It is due to more significant the appraisal the better because it displays the actual expenditure incurred during the production, and this will reduce the level of pollution because people will fear from high taxation.
Why might leasing a new Porsche be a good investment for an aspiring Hollywood film producer,
Hollywood film is an aspiration production. Based on the investment options Porsche is a highly recommended for micro and small enterprise entrepreneurs. The reason is that the initial fund of the monthly payment of statistical discrimination can be a challenge. The variation which appears among the demographic alignment concerning the actual countdown differentiation among the groups. In some situations, such as marketing insurance the statistical discrimination is allowed, while in some cases, it is illegal. For instance, an indication of grace and the stigmatization in the market explicitly based on gender. Therefore, considering the film producer, leasing a new Porsche might appear a good investment since it would reflect him as wealthy producers of films. It would however attract the clients to the company to raise his attitude and long-term development of the company.
Briefly, the theorized behavior is distinction analyzed between services, quality of goods, or the personnel based on the features of a group in which one is assured of a sense of belonging. In an industry such as film, persons are featured to possess high-quality goods and rich with materials such as cars
asymmetric information
Asymmetric information is a scenario when one of the parties involved in the transaction is having more material facts and information than others. Marginal cost is the additional cost of spending one more unit of a resource, while a marginal benefit is a benefit derived from one more unit resource.
Example of Asymmetric information
An example of Asymmetric information is the financial markets. These markets have more knowledgeable lenders in economic status than the borrowers. However, the lender experiences a challenge in identifying the likelihood of the borrower default. Therefore, the lender tries to solve this challenge by focusing on the historical statement of the salaries. However, this historical information is limited to the data required. The effectiveness of this aspect is that the lenders will tend to charge higher to cover the risks.