3. Suppose that there are four roommates who have to decide whether or not to acquire a TV that costs $4100. Person A is willing to pay $150 to have the TV present, while person B is willing to pay $140, person C is willing to pay $50, and person D is willing to pay $90. The willingness-to-pay is one's private information. a. Provide a Groves-Clarke mechanism (step by step) to achieve an efficient outcome. Explain who the pivotal person(s) is and calculate the tax for each pivotal person.

3. Suppose that there are four roommates who have to decide whether or not to acquire a TV that costs $4100. Person A is willing to pay $150 to have the TV present, while person B is willing to pay $140, person C is willing to pay $50, and person D is willing to pay $90. The willingness-to-pay is one's private information. a. Provide a Groves-Clarke mechanism (step by step) to achieve an efficient outcome. Explain who the pivotal person(s) is and calculate the tax for each pivotal person.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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