Back to Assignment Attempts: Average:S Voluntary contributions toward a public g

Question

Back to Assignment Attempts: Average:S Voluntary contributions toward a public good Dmitri and Jake are considering contributing toward the creation of a botanical garden. Each can choose whether to contribute $300 to the botanical garden or to keep that $300 for a new suit Since a botanical garden is a public good, both Dmitri and Jake will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.70 of benefit. For example, if both Dmitri and Jake choose to contribute, then a total of $600 would be contributed to the botanical garden. So, Dmitri and Jake would each receive $420 of benefit from the botanical garden, and their combined benefit would be $840. This is shown in the upper left cell of the first table. Since a new suit is a private good, if Dmitri chooses to spend $300 on a new suit, Dmitri would get $300 of benefit from the new suit and Jake wouldn't receive any benefit from Dmitri's choice. If Dmitri still spends $300 on a new suit and Jake chooses to contribute $300 to the botanical garden, Dmitri would still receive the $210 of benefit from Jake's generosity. In other words, if Dmitri decides to keep the $300 for a new suit and Jake decides to contribute the $300 to the public project, then Dmitri would receive a total benefit of $300+ $210= $510, Jake would receive a total benefit of $210, and their combined benefit would be $720. This is shown in the lower left cell of the first table.

Explanation / Answer

1. When Jake doesn't contribute and Dimitri Contribute:

Jake get benefit of 300 which he spend on weekend gateway and $ 210 i.e. 0.70 of $ 300 which Dimitri spend on public good. So, total benefit received by Jake = 300 + 210 = $ 510

Dimitri gets benefit of $ 210 only.

Total benefit = $ 510 + $ 210 = $ 720

2. When Jake and Dimitri do not contribute:

Both will get benefit of $ 300 which they spend on botanical garden. So, total benefit = $ 600

3. When both Dimitri and Jake contribute to the botanical garden.

4. Dimitri benefit when Jake doesn't contribute: 0.70 of Dimitri investment X 300 = $ 210

5. Dimitri benefit when Jake and she don't contribute: $ 300

6. Not to contribute

7. Not to contribute

8. The free rider problem

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