Why majority voting rule efficient amount of public good

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Assignment:

1. If 3 voters have a reservation price for each and they would like to share the cost among themselves equally, will the majority voting rule give the efficient amount of public good? Why/Why not?

2. If there is no cost for education (signaling), then which of the three equilibrium we discussed in class (separating equilibrium pooling equilibrium with no education and pooling equilibrium with education ), is going to be experienced in this situation. Explain.

3. State the second theorem of welfare economics

4. If the agent has two type of actions ( x and y ) and principal have no idea which type the agent is, and principal wants him to induce him to induce x effort whereas the cost function for x is c(x) and cost function for y is c(y). To offer him full insurance contract what must be true for the principal? Is offering the full insurance contract efficient for the principal in this case?

Reference no: EM133411956

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