Question 1:

John Tierney wrote this in his August 30 column in the New York Times:

"Judgment Day has arrived in California, but not exactly as
prophesied. The ones sitting on the right-hand side are the sinners.

They're stuck in bumper-to-bumper traffic while the righteous fly past
them in the far left lanes. Those freeway lanes used to be reserved
for car pools, but they've just been opened to a new group: those of
us virtuous enough to drive the right hybrids.

I'm not a good enough person yet to own a hybrid, but I've been
passing for one. I rented a Toyota Prius for the pleasure of cruising
the car pool lanes and parking free at meters, another perk available
here in Los Angeles. I've enjoyed it all, especially the envious looks
from guys in S.U.V.'s, and I can understand why hybrid drivers in
other states and cities are clamoring for similar privileges.

But even if these new privileges put more fuel-efficient cars on the
road, I'm afraid the net effect will be dirtier air and more gasoline
consumption. The promoters of hybrids are committing the sin
identified by the ecologist Garrett Hardin in ''The Tragedy of the
Commons,'' the 1968 essay providing one of the foundations of
environmentalism."


1.a) Is this a tragedy of the commons?

1.b) Why does Tierney conclude that allowing hybrids in the HOV lanes
     will increase pollution and gas consumption?

1.c) Do you agree with his conclusions?  Why or why not?


Question 2:

Consider a simple TFT protocol to regulate storage exchanges: If A
wants to store a MB on B then B can store a MB on A.  A and B can
query one another to ensure that their files are being stored
faithfully.  If A fails a query, B will discard its files, and
vice-versa.

2.a) What problem could arise if you built a backup system with this
     protocol?

2.b) How would you fix the protocol?  Discuss the pros and cons of
     your solution.


Question 3:


Imagine an Internet recommender system, such as Amazon's, which
generates recommendations of the form "if you liked X, you might like
Y."  You can model this service as a peer-to-peer system in which
customers share their experiences with one another through the
retailer.

First, assume that the retailer faithfully reports what the customers
tell it about their experience.   

3.a) Describe a situation where it is in users interest to be
     truthful about their experience.  Explain why.

3.b) Describe a situation where it is in users interest to lie about
     their true experience.  Explain why.

It has been observed that firms with recommendation services have
slightly higher prices for the same good than those without.  This
means that firms are able to extract a premium from customers to
decrease their level of uncertainty when shopping.  Given that a
recommender service is valuable enough to customers that they are
willing to pay for it, consider the incentives of the retailer.

3.c) Describe a situation where it is in the retailer's interest to
     faithfully retell what other customers have said.

3.d) Describe a situation where it is in the retailer's interest to
     lie about what other customers have said.

3.e) Does the price that the retailer is able to extract affect the
     likelihood of 3.c or 3.d?