About 200 couples in your community have formed an association to exchange child

Question

About 200 couples in your community have formed an association to exchange child-sitting services. Each couple agrees to look after another couple’s kids as long as someone looks after their kids when they finally want to go out.

To ensure everyone is treated equally, the association issues each couple a certain number of coupons. Each coupon is worth an hour of sitting. One couple going out gives the appropriate number of coupons to the couple providing the services. Eventually, when that second couple decides to go out one evening, it dips into its pool of earned coupons and pays some to some other couple.

The system pretty much regulates itself. Parents can’t get anyone to sit their kids unless they have coupons, so they all have an incentive to earn coupons by sitting others’ kids. Each couple ends up doing as much sitting as it gets.

It works well for a while.

But soon you find out that most couples are hoarding their reserves of coupons for times when they really want to go out – such as in the spring and summer, on weekends, or on special occasions. They don’t want to risk being without enough coupons when the time comes to go out, and so are hesitant to go out much of the time.

The result is that it becomes really difficult for couples to earn coupons because few people are going out.

Question: If you were head of the association, what would you do to solve this problem? How would your change(s) help the matter?

Explanation / Answer

This question might be pertaining to some theory taught in class which has not been mentioned here. Hence, I will just give my views and suggestions.

The following steps can be taken to prevent hoarding of coupons:

1) Put a maximum cap on the number of coupons a family can store. This ensures that a few families do not store a large number of coupons.

2) Add a depreciating value to the coupons. A coupon that was obtained an year ago has a lesser value than a coupon obtained today. This encourages the family to not store coupons but spend them as soon as they get it.

3) Restrictions on coupon spending: During the vacation season, a family cannot spend more than a specified number of coupons. This ensures that the family will not want to store more than that number of coupons.

4) Coupons come with an expiration date.

5) New coupons are added to the market (society) by various other means, such as helping the society. This ensures that even if families do not go out much, coupons can be earned and a healthy flow is maintained.

Several other changes can solve this problem. These are but, a few of them. Many of them can be combined to ensure better results.

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