Question
If all four people go to the restaurant, and Alice Jazmine and Juan all order the $20 entree, Kevin is going to get the $40
If all four people go to the restaurant, and Alice Jazmine and Juan all order the $20 entree, Kevin is going to get the $40 entree. The first reason being is that he will end up paying $25 dollars for a $40 meal (100/40=25). Secondly, Kevin's benefit is going to be $10 (35-25=10) compared to the rest of the group's benefit (25-25=0).
Now we ask Juan if he wants to change his behavior, he says yes because of his benefit.
Kevin is going to keep getting the $40 entree, Juan is going to join him, Alice and Jazmine are going to continue getting the $20 entree. Now the cost of the meal per person is going to be $30 (120/4=30). The benefit for Alice and Jazmine is -5 (25-30=(-5)). The benefit of Juan and Kevin is $5 (35-30=5). Jazmine now realizes that she can get the same benefit as if 3 people get the $20 and one gets the $40 or 3 people get the $40 and 1 person gets the $20.
Now Kevin, Juan and Jazmine all get the $40 entree. Alice continues to get the $20 entree. The meal costs $35 per person (140/4=35). The benefit of the people getting the $40 entree is 0 (35-35=0) and the benefit of Alice is going yo be (-10) (25-35=(-10)).
Alice now has a decision to make, if all the other people are receiving a benefit better than her, why would she stay getting the $20 entree when the greater benefit is going to be with the $40 entree.
Alice now switches to the $40 entree. The cost per person is $40 and the benefit for everyon is (-5) (35-40=(-5)).
Even though the benefit is in the negative, this is still greater than the benefit she had before.
The equilibrium is everyone gets the $40 meal because no matter what, someone is going to want to change their behavior. If one person is getting the $40, someone else will realize that their benefit will be better if they switch as well. This trend continues to go throughout the game because people realize they get a better benefit by switching to the $40 meal. This is why in the end the equilibrium is the $40 meal. Nobody will want to change back from the $40 meal to the $20 meal as well as if someone if getting the $20 meal, they will want to switch to the $40 meal to grow their own benefit.
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