Reference no: EM132712406

Suppose that a political leader raises $30 billion in tax revenue. Assume that the size of the winning coalition is 25,000 and that the size of the selectorate is 50 million.

a. If the leader were to spend all of the tax revenue on providing private goods, what would the maximum value of the private goods be for each member of the winning coalition if we assume they all receive the same amount?

b. How much are private goods worth to someone who is not a member of the winning coalition?

c. What is the probability that a member of the selectorate will be a member of the winning coalition?

d. What is the probability that a member of the selectorate will not be a member of the winning coalition?

e. Suppose that you are a member of the winning coalition and you are thinking of defecting to the challenger. What is the maximum expected value (utility) of defecting to the challenger in terms of private goods only? (You must write the equation you use to calculate your answer)

f. Based on this, how much does the political leader have to give each member of the winning coalition in terms of private goods in order to ensure that the members remain loyal?

g. What is the difference between how much the leader could give each member of the winning coalition and how much the leader needs to give each member of the winning coalition to ensure the members loyalty?

h. If the leader only spends what he needs to, how much revenue does he have leftover?

i. What is the leader likely do with this leftover revenue?