Reference no: EM131161446
There are two distinct proposals, A and B, being debated in Washington. The Congress likes proposal A, and the president likes proposal B. The proposals are not mut ually exclusive; either or both or neither may become law. Thus there are four possible outcomes, and the rankings of the two sides are as fol lows, where a larger num ber represents a more favored outcome.
Outcome Congress President
A becomes law 4
B becomes law 4
Both A and B become law 3 3
Neither (status quo prevails) 2 2
(a) The moves in the game are as follows. First, the Congress decides whether to pass a bill and whether it is to contain A or B or both. Then the president decides whether to sign or veto the bill. Congress does not have enough votes to override a veto. Draw a tree for this game and find the rollback equilibrium.
(b) Now suppo e the rules of the game are changed in only one respect: the president i giv n the extra power of a line-item veto. Thus, if the Con gress pa e a bill containing both A and B, the president may choose not only ro ign or veto the bill as a whole, but also to veto just one of the rwo items. Show the new tree and find the rollback equilibrium.
(c) Explajn intuitively why the difference between the two equilibria arises.
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