Voluntary contributions toward a public good
Juanita and Neha are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water
fountain or to keep that $300 for a weekend getaway.
Since a water fountain is a public good, both Juanita and Neha will benefit from any contributions made by the other person. Specifically, every dollar
that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Juanita and Neha choose to contribute, then a total
of $600 would be contributed to the water fountain. So, Juanita and Neha would each receive $540 of benefit from the water fountain, and their
combined benefit would be $1,080. This is shown in the upper left cell of the first table.
Since a weekend getaway is a private good, if Juanita chooses to spend $300 on a weekend getaway, Juanita would get $300 of benefit from the
weekend getaway and Neha wouldn't receive any benefit from Juanita's choice. If Juanita still spends $300 on a weekend getaway and Neha chooses
to contribute $300 to the water fountain, Juanita would still receive the $270 of benefit from Neha's generosity. In other words, if Juanita decides to
keep the $300 for a weekend getaway and Neha decides to contribute the $300 to the public project, then Juanita would receive a total benefit of
$300+$270=$570, Neha would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the
first table.
Complete the following table, which shows the combined benefits to Juanita and Neha as previously described.
Neba
3.Voluntary contributions toward a public good
Juanita and Neha are considering contributing toward the creation of a water fountain. Each can choose whether to contribute $300 to the water
fountain or to keep that $300 for a weekend getaway.
Since a water fountain is a public good, both Juanita and Neha will benefit from any contributions made by the other person. Specifically, every dollar
that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Juanita and Neha choose to contribute, then a total
of $600 would be contributed to the water fountain. So, Juanita and Neha would each receive $540 of benefit from the water fountain, and their
combined benefit would be $1,080. This is shown in the upper left cell of the first table.
Since a weekend getaway is a private good,if Juanita chooses to spend $300 on a weekend getaway, Juanita would get $300 of benefit from the
weekend getaway and Neha wouldn't receive any benefit from Juanita's choice. If Juanita still spends $300 on a weekend getaway and Neha chooses
to contribute $300 to the water fountain, Juanita would still receive the $270 of benefit from Neha's generosity. In other words, if Juanita decides to
keep the $300 for a weekend getaway and Neha decides to contribute the $300 to the public project, then Juanita would receive a total benefit of
$300+$270=$570, Neha would receive a total benefit of $270, and their combined benefit would be $840. This is shown in the lower left cell of the
first table.
Complete the following table, which shows the combined benefits to Juanita and Neha as previously described
Neha
