978-0393919684 Chapter 14 Solution Manual Part 1

Unlock access to all the studying documents.

View Full Document

Solutions to Chapter 14 Exercises

SOLVED EXERCISES

S1. (a) In the pure-threat case, the union’s expected payoff is 50(1 – p) – 100p = 50 – 150p. The

(b) Diagram is given below:

(d) If brinkmanship is used, a profitable company is better off conceding to the union

S2. (a) This scene makes the escalation of risk inherent in brinkmanship explicit. If both players

continue on their set paths—the army officer in raising the helicopter and the gunman in refusing to

(b) In this film, the FBI agent makes explicit a probabilistic threat that spending any of the

found ransom money may lead to Hank’s arrest. Given this information, Hank must determine his own

S3. The examples described in this exercise (and in Exercises S4 and S5) do not have unique,

mathematically correct answers; their purpose is to get students thinking about real-world issues using

(a) THE URUGUAY ROUND OF TRADE NEGOTIATIONS

General trade liberalization brings overall economic benefits to all countries. But within each

In the Uruguay Round, one can identify three main parties or groups of nations:

1. The United States’ main interest was to achieve liberalization of the markets for its traditional

(agriculture) and emerging (especially high technology, including high-tech services like banking

2. Japan and Europe wanted to protect their farmers and traditional manufacturing industries but

3. The developing countries wanted to protect and promote their own fledgling high-tech and

service sectors but to get access to the developed countries’ markets in textiles, traditional

Successful conclusion of the negotiations in such a forum needs near unanimity; therefore, each group

could threaten to cause the talks to collapse. If this meant merely continuation of all the liberalizing agreements

The Uruguay Round was launched in 1986 with an extremely ambitious agenda that included all

the items listed above—services, intellectual property rights, investment, agriculture, and so on—and

plans to tighten GATT’s procedures for settling disputes among member countries. The negotiations

(b) THE CAMP DAVID ACCORDS

By the mid-1970s, the prospects for peace in the Middle East looked bleak. Israel had captured a

large amount of territory in the Six-Day War of 1967: the Sinai Peninsula from Egypt, the West Bank and

The best prospect was that of a deal between Israel and Egypt. Indeed the two had negotiated

some very limited disengagements in the Sinai in 1973 and 1975. In the longer run, Israel’s main

West Bank was regarded as an integral part of the historic land of Israel by a large proportion of the

population, and almost no Israeli was willing to give up East Jerusalem. Sinai was the most promising

candidate for a land-peace trade. Egypt attached considerable importance to getting the Sinai back. But it

This was the background in the summer of 1977, when President Jimmy Carter initiated a direct

involvement of the United States as an intermediary between Israel and Egypt, and possibly also other

Arab countries and the PLO. He and his diplomats held separate meetings with the various parties in

In early 1978, Carter began another round of discussions in an attempt to bring the two sides

together. Little progress was made; in particular, Begin proved totally inflexible on the land question and

Neither side knew for sure how much weight the other placed on achieving a compromise. Using

brinkmanship, each could explore the other’s willingness to compromise while trying to get a better deal

But there was also a game involving Carter, who by his active involvement and by convening

such a high-level, high-visibility meeting, had put a lot of U.S. prestige on the line. Failure of the meeting

After 10 days of exchanging proposals that embodied largely entrenched positions, and offers of

compromise only on issues that mattered relatively less to the other side, an impasse seemed to have been

Finally, on September 17, accord was reached on several issues, and the parties agreed to declare

the summit a success, leaving other issues to be resolved later. It transpired that Sadat valued the return of

Sinai more than the settlement of the Palestinian question, and Begin did not regard a collapse of the talks

S4. (a) THE BEIJING MASSACRE

After the death of Mao Zedong and the advent of Deng Xiaoping to supreme power in the late

1970s, China embarked on a remarkable program of economic liberalization, especially in agriculture.

As information about the rest of the world became more easily accessible, a group of students

The governing elites, comprising the Communist Party and the military, wanted to maintain their

control and power. Therefore, they saw the democracy movement as a major political challenge, even

The immediate trigger for the student protests in spring 1989 was the death on April 15 of the

former prime minister Hu Yaobang. Hu had liberal tendencies and had been ousted by hard-liners two

years earlier, thereby acquiring something of a hero status among the students. Posters mourning the death

The government imposed martial law on May 19, and the liberally inclined Zhao Ziyang was

confined to his house. The hard-liner Li Peng made some threatening speeches, but there was no

Finally, during the night of June 3–4, troops attacked the demonstrators, shooting and killing

(b) THE CATERPILLAR STRIKE

The wages that striking workers lose for the duration of a strike generally exceed the extra gains

Thus a strike can be a valuable strategy in its role as a threat—an attempt to compel the company to

Caterpillar, the United States’ largest manufacturer of construction equipment, was facing

increasingly stiff competition from Japan’s Komatsu and needed cost savings and productivity increases.

In contract negotiations with the UAW in fall 1991, the company tried to institute more flexible work

On November 4, 1991, the UAW called a limited strike involving 2,400 workers. Three days later

the company responded by locking out 6,000 other workers. The dispute dragged on. The strike lasted

five months. Then some workers returned without a contract. The strike resumed in 1994 and went on for

A tentative settlement was reached between the company and UAW negotiators on February 13,

1998, only to be voted down by the rank-and-file workers. Money was not the issue this time; the contract

S5. (a) TAIWAN-CHINA RELATIONS

After the defeat of Japan in 1945, the Chinese Civil War between the Chinese Nationalist Party (or

Guomintang) and the Chinese Communist Party resumed. Over the next few years the communists

From 1949 until the early 1970s most Western nations recognized the Republic of China,

commonly known as Taiwan or Nationalist China, as the legitimate government of all of China—

During the 1950s and 1960s, an increasing number of countries initiated diplomatic relations with

the People’s Republic of China, which was of course the de facto authority in mainland China. Ideological

International recognition for the Republic of China plummeted throughout the 1970s, as nations

chose instead to recognize the People’s Republic of China as the legitimate authority. The Nixon

As the Republic of China’s one-party system (imposed by the Guomintang after its arrival in

1949) increasingly gave way to democratic reforms in the 1980s and 1990s, a passionate debate has arisen

among the people of Taiwan about their identity and political status. The Pan-Blues are aligned with the

Throughout its history, the People’s Republic of China has strongly voiced its opposition to a

possible Taiwanese declaration of independence, recently underscoring this stance with the ratification in

Officially, both sides are committed to eventual reunification. Most of the world, most

prominently the United States, advocates for the maintenance of the status quo: that the People’s

Despite mutual suspicions that largely deepened during the presidency of the

pro-independence Chen Shui-bian of the DPP (2000–2008), there have been marked improvements

(b) THE MILITARIZATION OF SPACE

Satellites are an increasingly vital tool for modern militaries. The first military application of satellites

But satellites also serve many other important roles. Global Positioning System (GPS) satellites, run by

the U.S. Air Force, provide precise positioning data not only to troops on the ground but also to ships,

The United States has by far the most military and dual-use (serving both civilian and military

applications, such as GPS) satellites in orbit. Many of its battlefield advantages are directly derived from

There are a number of ways to interfere with the operation of satellites. Powerful ground-based

lasers can temporarily dazzle or permanently blind spy satellites. Signals to or from space can be jammed

on or near the ground. Satellites can be attacked by using antisatellite (ASAT) missiles either to strike

The effects of physically destroying satellites or disabling them via a high-altitude EMP are

potentially disastrous—not only for the military capacities of both sides of a conflict—but also for

dollars, depending on the severity of the destruction. Even worse, depending on the amount and location

In January 2007, China shocked the world by destroying one of its own aging weather satellites

with a ground-based antisatellite missile. This was the first live ASAT test since September 1985, when

Thirteen months later, in February 2008, the United States destroyed a malfunctioning spy

satellite with a sea-launched missile. The satellite’s orbit was low and decaying, and it was expected to

deorbit and crash within weeks. Because the satellite carried half a ton of hydrazine, a highly toxic gas

used as rocket fuel, it was feared that an uncontrolled deorbit could be dangerous if enough of the satellite

Current military uses of space enhance the capabilities of forces on the ground, on the sea, or in

the air. But there is also a great deal of potential for space-based offensive weaponry. Antisatellite

satellites could disable or destroy an adversary’s satellites by intercepting them or by employing physical

At present, no nation has openly deployed offensive space-based weaponry. To do so would be

politically, diplomatically, and strategically very risky. It would likely trigger an extremely costly arms