After Hurricane Maria, hundreds of nonprofit organizations streamed to Puerto Rico and other Caribbean islands to provide disaster relief. Research has found that coordination between nonprofits during disasters is difficult to maintain—it’s easy for individual nonprofits to fundraise and pursue programming on their own while ignoring other organizations working on the same issues. Additionally, there are incentives to do projects that are cheap and have fast turnaround, since donors respond to the visibility of organizations providing disaster relief. Consider two nonprofit organizations working in Puerto Rico. Together, they could spend time coordinating their efforts and run a shelter for hurricane victims, providing each organization with 100 utils. Alternatively, they could individually distribute paper towels—a simple, low-cost, fast, and visible project—and receive 5 utils. This situation can be modeled with the following payoff matrix: Nonprofit 2 Run Shelter Distribute paper towels Nonprofit 1 Run Shelter 100,100 0,5 Distribute paper towels 5,0 5,5 What kind of game is this? How do you know? In the absence of communication, what are the two nonprofits' mixed strategies? Under what conditions will nonprofit 1 choose to run the shelter? (i.e., what are the probability cutoffs for each nonprofit choosing to run the shelter or distribute paper towels?) Show your work.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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After Hurricane Maria, hundreds of nonprofit organizations streamed to Puerto Rico and other Caribbean islands to provide disaster relief. Research has found that coordination between nonprofits during disasters is difficult to maintain—it’s easy for individual nonprofits to fundraise and pursue programming on their own while ignoring other organizations working on the same issues. Additionally, there are incentives to do projects that are cheap and have fast turnaround, since donors respond to the visibility of organizations providing disaster relief.

Consider two nonprofit organizations working in Puerto Rico. Together, they could spend time coordinating their efforts and run a shelter for hurricane victims, providing each organization with 100 utils. Alternatively, they could individually distribute paper towels—a simple, low-cost, fast, and visible project—and receive 5 utils.

This situation can be modeled with the following payoff matrix:

		Nonprofit 2
		Run Shelter	Distribute paper towels
Nonprofit 1	Run Shelter	100,100	0,5
	Distribute paper towels	5,0	5,5

What kind of game is this? How do you know?
In the absence of communication, what are the two nonprofits' mixed strategies?
Under what conditions will nonprofit 1 choose to run the shelter? (i.e., what are the probability cutoffs for each nonprofit choosing to run the shelter or distribute paper towels?) Show your work.
Assuming the two nonprofits could coordinate, what is the expected payoff of engaging in a mixed strategy rather than coordinating? (i.e. choosing to gamble based on probability cutoffs rather than communicate and coordinate in person?) Show your work.

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