Individual vs. Group Incentives in a Shared Project
A farmer is considering whether to contribute to a community irrigation project. The personal cost for any farmer who contributes is $10. For each farmer who contributes, every farmer in the community (including non-contributors) receives an $8 benefit. Currently, two other farmers have already contributed.
Based on this scenario, first, calculate the farmer's net personal payoff if they choose to contribute, and their net personal payoff if they choose not to contribute. Second, explain the tension that exists between the farmer's optimal individual choice and the potential outcome for the community if every farmer were to make their decision in the same self-interested way.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
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A farmer is part of a community irrigation project where the personal cost to contribute is $10, and each contribution provides an $8 benefit to every farmer in the community. If this farmer decides to contribute, knowing that two other farmers have already done so, their personal net payoff will be $____.
A farmer is deciding whether to contribute to a shared irrigation project. The personal cost to contribute is $10. For each person who contributes (including the farmer themselves), every farmer in the community receives an $8 benefit. Given that two other farmers have already contributed, match the farmer's potential action with their resulting personal payoff.
Individual vs. Group Incentives in a Shared Project