Fifty residents of a college dorm all like espresso. An espresso machine costs $
ID: 1206936 • Letter: F
Question
Fifty residents of a college dorm all like espresso. An espresso machine costs $1,000. Each dorm resident is willing to pay up to $50 for the machine. However, the resident's willingness to pay is their "private information." One resident, Eugene, decides to take up a collection. Assuming there is no way to make other residents contribute (and Eugene does not know what the resident's willingness to pay is), is Eugene likely to raise the necessary $1,000? Why or why not? What could be done to improve his chances of success?
Explanation / Answer
$1000 is cost of espresso machine.
50 residents are there and each willing to pay $50 per machine
total 2500.
Eugene decides to take up collection,
Eugene must go ahead and start collecting money, Whatever each resident pays is his donation and after the entire amount is collected and machine purchased,
Eugene can return the remaining amount of money to the dorm residents.
This will improve eugene chances of collecting money in future.
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