Question

# Suppose the government is considering the provision of traffic lights at three different locations, denoted 1, 2 and ach traffic light costs \$600 to install. There are three individuals(A, B, and C). If a traffic light is installed all individuals will be taxed equally to pay for the costs and this information is known to the individuals. The decision whether to install each individual traffic light is taken on the basis of a majority vote; and, for each individual, if the individual's valuation is greater than or equal to the cost to them then they would vote in favour of provision. The table below gives the value that each individual places on installing a

a. Explain which traffic lights will be installed, and whether the outcomes are efficient. [9marks] b. Explain for each of the three locations what decisions would be made using a Clark-Groves mechanism, how much each individual would pay and how much revenue would-be raised towards the cost. To ease your calculations, you can use a calculator or a computing software such as Excel. [10 marks] c. What is the main disadvantage of the yes-no majority vote system and what is the main

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