Table 11-2
Consider a small town with only three families, the Johnson family, the Marshall family, and the Walker family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight.
-Refer to Table 11-2.Suppose the cost to install each streetlight is $450 and the families have agreed to split the cost of installing the streetlights equally.To maximize their own surplus,how many streetlights would the Walker's like the town to install?
Definitions:
Expected Value Theory
A mathematical concept that calculates the average outcome when the future includes scenarios that may or may not happen, widely used in decision-making processes.
Lottery Ticket
A form of gambling that involves the drawing of numbers for a prize.
Odds of Winning
A numerical expression that represents the likelihood of winning a game, bet, or any situation where there is a competition with a possible outcome.
Representativeness Heuristic
A cognitive bias in decision making where the likelihood of an event is judged based on how similar it is to the population it came from, often leading to errors in judgment.
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