Question

1. Suppose certain skill could only increase the productivity if majority of workers participate in a month-long training program. Workers make their decision individually.

Payoff (William, other)	Majority of people are trained	Majority of people are not
William decide to acquire skill	1,1	-1,0
William decide not to acquire	2,1	0,0

Is there a dominant strategy for William? If yes, which one? (recall the definition for dominant strategy)

What is the name for the scenario in which William did not participate the training program, while still benefit from an overall increase in wage rates?

Answer 1

(1) Yes, there is a dominant strategy for William given by deciding not to acquire (not participating)

This is because this strategy maximizes the payoff for William irrespective of the strategy chosen by others

If others choose to train, we have 2 > 1, and thus William is better off without training

If others choose to not train, we have 0 > -1, and thus William is better off without training

(2) The scenario is called free-riding as William is free-riding on other workers as he enjoys the benefits of increased wage without actually contributing anything himself by upgrading his skills.