There are three individuals in a community that is deciding whether to unveil a

Question

There are three individuals in a community that is deciding whether to unveil a statue of Elvis. Individual 1 would receive a net benefit of 25 if the statue were unveiled. Individual 2's net benefit would also be positive and would be 20. Individual 3, however, would be very disturbed by this unveiling and would receive a negative net benefit of –50. If the community uses a "Clarke tax" to decide whether to undertake this project (note that the project has 0 cost), will the project be undertaken? What will be the Clarke tax paid by each person?

Explanation / Answer

Total Social benefit = 25 + 20 - 50

Total Social benefit = - 5

So, Project will n't be undertaken.

Clarke Tax Paid by Individual 1 = 0 as he is n't pivotal (i.e his vote will n't change decision)

Clarke Tax paid by Individual 2 = 0 as he is n't pivotal (i.e his vote will n't change decision)

Clarke Tax paid by Individual 3 = 20+25 = 45 as he is pivotal (i.e his vote will n't change decision)

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