Problems For Section

° 1. The proposition that the little man is rational to be a price taker applies to more than markets. It applies to politics. Suppose that Claudia Goldin and Peter Temin are candidates for the Senate in what is expected to be one of the closest races in American history. A million people are expected to vote, yet a swing of only a thousand votes one way or another is expected to make the majority. If each arrangement of the thousand votes is equally probable, it follows that the probability of an exact tie—the only circumstance in which an individual vote counts—is expected to be 1 chance in 2000. You value a Goldin victory at $100. That is, if some political magician could guarantee Ms. Goldin's victory for a fee (he cannot, of course), you would be willing to pay him $100. Set aside any pleasure you get from fulfilling your patriotic duty. True or false: If it costs you more than 5 cents in time and trouble to go to the polls and vote, it would be irrational for you to do so.

f 2. Under common law, the "enclosure" of an English village before the eighteenth century required the consent of every one of the 40 or 50 owners of rights in the village ("enclosure" involved the gathering of scattered plots of land into consolidated holdings). During the eighteenth century the English Parliament developed another method of enclosure, which could take the place of the common law method and which required only a vote by a majority of the 40 or 50 owners to enclose, not unanimous consent.

a. Under the common law method, what would happen if one owner refused to enter the bargain? What could the recalcitrant owner demand of those who wanted the enclosure to go forward? Who else would have an incentive to make this demand?

b. Under the new parliamentary method, what happens to the power of one owner to block an enclosure? Why? Would you expect enclosure to become more common after the new method was introduced?

3. When the Bally Corporation decided to build a casino in Atlantic City it announced that it would pay $100,000 to each owner of a house lot on the proposed site. Even though the assessed value of the houses was less than $15,000, some homeowners still held out for more. Why?

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