Categories
Externalities

Common Pool Donation

The employees are debating if it’s right to give $1,000 to a church so that a recently deceased co-worker can go to heaven. When the majority of employees agree that’s the best use of the money, Amy offers a collection so that everyone can chip in to help finance the project. Jonah chips in $5, but no one else is willing to add money to the bowl, and someone even takes the $5 out of the bowl. Like other public good problems, people are not willing to chip in to provide the services they all agree are important. There’s no incentive to contribute, so everyone becomes a free-rider.

Categories
Externalities

Tragedy of the Shrimp Buffet

Bo tells one of the guests at his wedding to stop eating all the shrimp because there will not be enough left for everyone else. Since the meal portion of the evening is a buffet, there’s an incentive to eat more than your share, but that leaves less shrimp available for other guests.