Prof. Dr.

Anke Gerber

Social Choice and Welfare

2. Exam Winter Term 2011/12

Important Instructions

1. There are 90 points on this 90 minutes exam.

2. You are not allowed to use any course material (books, slides, lecture notes
etc.).

3. Please answer the questions only on the paper that is handed out to you.

4. Please write your name on each sheet of paper, number the pages and leave
a margin (2.5cm) on the right of each page.

5. Please write legibly and make sure that your answers are coherent and
complete.

Good Luck!

1
Exam, Social Choice and Welfare, March 29, 2012 2

Problem 1 (16 Points)

A firm wants to hire a new employee. The head of recruiting has the following
preference relation over the applicants: She weakly prefers one applicant A over
another applicant B if

EITHER A’s grade in the bachelor degree is at least as good as B’s grade

OR A has completed at least as many internships as B.

1. Is this preference relation complete? Argue why or why not.

(6 points)

2. Is this preference relation transitive? Argue why or why not.

(10 points)
Exam, Social Choice and Welfare, March 29, 2012 3

Problem 2 (46 Points)

1. Explain why the simple majority voting rule is no Arrovian social welfare
function on an unrestricted domain.
(6 points)

2. Explain why the leximin rule is no Arrovian social welfare function.

(10 points)

3. Let there be three alternatives x, y, z, and three individuals 1, 2, and 3. The

individuals’ preference orderings are represented by the following utility
functions, where u(x, i), u(y, i), and u(z, i), denotes individual i’s utility for
alternatives x, y, and z:

Individual 1: u(x, 1) = 1, u(y, 1) = 3, u(z, 1) = 2

Individual 2: u(x, 2) = 2, u(y, 2) = 1, u(z, 2) = 3
Individual 3: u(x, 3) = 3, u(y, 3) = 4, u(z, 3) = 2

(a) Determine the social preference ordering over the alternatives x, y, and
z, that results under the leximin rule.
(14 points)
(b) Which alternative(s) is (are) chosen from the set {x, y, z} under the
leximin rule?
(5 points)
(c) Determine the social preference ordering over the alternatives x, y, and
z, that results under the simple majority voting rule.
(6 points)
(d) Which alternative(s) is (are) chosen from the set {x, y, z} under the
simple majority voting rule?
(5 points)
Exam, Social Choice and Welfare, March 29, 2012 4

Problem 3 (28 Points)

Let there be two individuals who can either wear a white (w) or a black (b)
shirt and consider the alternatives ww, wb, bw, bb, where the first (second) letter
is individual 1’s (2’s) shirt color. The individuals’ strict preferences over the four
alternatives are

bw P1 ww P1 wb P1 bb
wb P2 ww P2 bw P2 bb.

1. Do the individuals have conditional or unconditional preferences? Give a

reason for your answers.
(8 points)

2. For the preferences given above and a social choice function, that satis-
fies Gibbard’s libertarian claim GL’, determine the choice set C(S) for
S = {ww, wb, bw, bb}.
(8 points)

3. Represent the collective choice problem as a non-cooperative game and solve

for the pure strategy Nash equilibrium (equilibria).
(12 points)