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Households A and B share a house with a garden in Southern Portugal. At a cost of $6 they could add an immovable hammock in
Households A and B share a house with a garden in Southern Portugal. At a cost of $6 they could add an immovable hammock in the garden that would be available to both households. To each household, the hammock is either worth $9 or $0. They agree to the following: Each household must tell the other how much it values the hammock. If they both say $9, they buy it and each household pays $3. If only one household says $9, it buys it and pays the full $6. If both, A and B, say $0, they do not buy it. Each household knows how much it values the hammock. But it only knows that the other household values the hammock $9 with a probability of 0.6, and $0 with a probability of 0.4. Each households must decide what value to announce assuming that the other household is honest. Which of these statements is correct? OHouseholds A and B systematically report $9. The outcome is mostly efficient. Households A and B honestly reveal their value. The outcome is not always efficient. Households A and B systematically report $0. The outcome is mostly inefficient. Households A and B honestly reveal their value. The outcome is efficient
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