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Incentives and Game Theory Jeffrey Ely April 13, 2015 This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License . Jeffrey Ely Incentives and Game Theory
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Putting Utilitarianism to Work Example Suppose that you and your roomate are considering buying an espresso machine for your apartment. The machine costs $50. Your willingness to pay is v 1 = 40. You know that your roomate has a willingness to pay v 2 but you don’t know what it is. (Your values are zero when you do not purchase the machine.) You and your roomate are choosing among the following alternatives. 1 no machine, no monetary payments. 2 espressso machine, any transfer scheme t = t 1 , t 2 such that t 1 + t 2 = 50. Jeffrey Ely Incentives and Game Theory
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Utilitarianism in Your Apartment The utilitiarian policy is to purchase the espresso machine if v 1 + v 2 50 and not to purchase the machine if v 1 + v 2 < 50. Jeffrey Ely Incentives and Game Theory
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Jeffrey Ely Incentives and Game Theory
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Jeffrey Ely Incentives and Game Theory
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Jeffrey Ely Incentives and Game Theory
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Split the Cost?
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