Question

AL (spring 2019) Pwot Mechanism Supbese a bridge casts 24 to buila and that tcostio to be shane d aeng s ix individuels (if t is built). Thein ihal valuation·f the bridge ( before deduchỉ natu cost) is as follows (uwhere B idge, bridge) (a) Apply the pivot mechanism t decide whethor os not to build ttha bridge, and the taxes levied en the individuals (b) Aodo @) when tha valus 4 B is altered t 2nd.iehud İl| 2 | 3 | 니 | 5 | 6一 d ALL. ofan, dat. 蛋remains the SARE. ITu Bargaining

Answer 1

Here the bridge cost 24 and we can observe that sum of valuation covers the cost of the bridge. So it would be efficient to provide the bridge. i.e. 2+5+6+4+1+6 = 24.

Each individual should be charged exactly the same amount that their valuation is for (assuming that govt. know this valuations). i.e. individual 1 should be charged 2 , individual 2 should be charged 5 etc.

In the second part we can se total valuation is less than the cost of the bridge. So it would be better to not provide the bridge.