ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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A small community has 20 people, each of whom has a wealth of $12,000. Each individual must choose whether to contribute $300 or $0 to the support of public entertainment for their community. The money value of the benefit that a person gets from this public entertainment is b times the total amount of money contributed by individuals in the community.
Question 3 options:
If 20b > 1, everybody is better off if all contribute to the public entertainment fund than if nobody contributes, but if 20b < 1, everybody is better off if nobody contributes than if all contribute
Everybody is worse off if all contribute than if nobody contributes if b > 1, but if b < 1, everybody is better off if nobody contributes.
This game has a dominant strategy equilibrium in which nobody contributes anything for public entertainment.
If 20b > 1, there is a dominant strategy equilibrium in which everybody contributes.
In order for there to be a dominant strategy equilibrium in which all contribute, it must be that b > 20.
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