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Two housemates are fed up of doing the washing up and want to buy a dishwasher (which is a
public good for them). Person 1 's utility function is U1(S,M2)=(1+5)Mt and person 2 's utility
function is U2(S,M2)=(3+S)M2 where S=0 if they don't buy the dishwasher and S=1 if they do, and
where Mt and M2 are the amount of money they spend on their respective private consumptions.
Person 1 has total income 2,000, and person 2 has total income f2,400. The maximum amount
that they could pay for the dishwasher and stall find a contribution scheme where they are both
better off than without it is: f,600 f1,400 f1,600 f2,000 f2,400

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Two housemates are fed up of doing the washing up and want t.pdf

  • 1. Two housemates are fed up of doing the washing up and want to buy a dishwasher (which is a public good for them). Person 1 's utility function is U1(S,M2)=(1+5)Mt and person 2 's utility function is U2(S,M2)=(3+S)M2 where S=0 if they don't buy the dishwasher and S=1 if they do, and where Mt and M2 are the amount of money they spend on their respective private consumptions. Person 1 has total income 2,000, and person 2 has total income f2,400. The maximum amount that they could pay for the dishwasher and stall find a contribution scheme where they are both better off than without it is: f,600 f1,400 f1,600 f2,000 f2,400