Problem
Two distinct proposals, A and B, are being debated in Washington. The Congress likes proposal A, and the President likes proposal B. The proposals are not mutually exclusive, either or both or neither may become law. Thus, there are four possible outcomes and the rankings of the two sides are as follows, where a larger number represents a more favored outcome.
|
Outcome
|
Congress
|
President
|
|
A becomes law
|
4
|
1
|
|
B becomes law
|
1
|
4
|
|
Both A and B become law
|
3
|
3
|
|
Neither A or B become law
|
2
|
2
|
A. The moves in the game are as follows. First, the Congress decides whether or not 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 and determine the equilibrium result.
B. Now suppose the rules of the game are changed in only one respect: the President is given the extra power of a line-item veto. Thus, if Congress passes a bill containing both A and B, the President may choose to not only sign or veto the bill as a whole, but also to veto one of the items. (As before, Congress does not have enough votes to overturn a veto.) Draw a tree for this game and find the equilibrium.
C. Explain why the different results for (A) and (B) make sense.