Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film:
Orson Alfred Woody Ingmar
Frist film 7 5 3 2
Second film 6 4 2 1
Third film 5 3 1 0
Fourth film 4 2 0 0
Fifth film 3 1 0 0
b. If it costs $8 to rent a video, how many videos should the roommates rent to
maximize total surplus?
c. If they choose the optimal number from part (b) and then split the cost of
renting the videos equally, how much surplus does each person obtain from
watching the movies?
f. What does this example teach you about optimal provision of public goods?
I would really appreciate the help. :)
Jeff (below) posted this same question. See my response.
1 answer