Question
Carl and Dora are neighbors, and they plan to adopt a pet together. While neither knows the other's preferences for certain, in truth Carl prefers
Carl and Dora are neighbors, and they plan to adopt a pet together. While neither knows the other's preferences for certain, in truth Carl prefers a cat to a dog (and he values this choice at $2,000), and Dora prefers a dog to a cat (and she values this choice at $3,000). What outcome would a VCG (Vickrey-Clarke-Groves) mechanism generate? A. Each is honest about the pet they prefer and by how much. They get a dog; Dora pays $2,000. B. Carl is honest about his preference; Dora claims she prefers a dog by less than $2,000. They get a dog; Carl pays $2,000. C. Dora is honest about her preference; Carl claims he prefers a cat by more than $3,000. They get a cat; Carl pays $3,000. D. Each claims to prefer their least favorite pet: Carl says he prefers a dog by $2,000, and Dora says she prefers a cat by $3,000. They get a cat; Dora pays $3,000.
The Actresses' and Actors' Ball is an annual event in Stadtlandia. In addition to the ticket price of $120, a guest who attends the Ball, on average, brings an extra $30 in profits to businesses based in Stadtlandia. Attracting Q guests requires promotional spending of 0.1Q2 by the organizers. All other costs of hosting the Ball are covered by sponsoring. Suppose that the parties can engage in Coasian bargaining over the number of attendees. How does the outcome depend on which party initially has the right to decide the attendance of the Ball? A. If the organizers have the right, there will be 500 attendees; if the city's businesses have the right, there will be no attendees. B. If the organizers have the right, there will be no attendees; if the city's businesses have the right, there will be 1,250 attendees. C. If the organizers have the right, there will be 750 attendees; if the city's businesses have the right, there will also be 750 attendees. D. If the organizers have the right, there will be 1,000 attendees; if the city's businesses have the right, there will also be 1,000 attendees.
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