Consider a situation where two people are deciding (strategically) invest or not to invest money in order to procure a public good. Each one has $500 that they can use for buying public or private good. (Simply assume the additive utility form). Suppose the valuation from the public good is $1000 to each of them. (i) What happens when cost of procurement is $900? (ii) What happens if the procurement cost is $ 400.

Consider a situation where two people are deciding (strategically) invest or not to invest money in order to procure a public good. Each one has $500 that they can use for buying public or private good. (Simply assume the additive utility form). Suppose the valuation from the public good is $1000 to each of them. (i) What happens when cost of procurement is $900? (ii) What happens if the procurement cost is $ 400.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter2: Economics: Eight Powerful Ideas

Section: Chapter Questions

Problem 19P

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