1. In a building society there are four flats. They have decided to contribute Rs.

1000 per
month as maintenance charge. But one of the flat owner declines to pay it as s/he does
not stay there. It has enraged all other flat owners and they decided to not maintain
any of the services as a mark of protest. They could afford sharing the contribution of
one flat owner (Rs.1000 /month) among themselves, but they decided not to
contribute at all, even their own share.
a. Is there any logic of such apparently irrational behavior?
b. What are the circumstances when the three owners would have decided to
pay their own part and also share the amount not provided by the fourth
owner?

5+5

Ans:

a) The act of three flat owners not paying / sharing the maintenance expenditure of the fourth
(in spite of their ability to pay the fourth flat owner’s share) is a successful collective action.

The act of revenge /protest/ showing disapproval to the act of the fourth owner (non-payment of
maintenance) is a public good to the other three flat owners.

2
Here, individual benefit (of public good or pleasure of protest) of each of the three flat owners is
higher than total cost of no maintenance. Hence, protest as public good is produced.

b) The three owners would have paid their own part and also shared among themselves the
amount not paid by the fourth owner if they have found that the individual benefit of public
good (utility of protest) is lesser than the cost of no maintenance.
1
This is a case of collective action failure to launch or continue the protest.
1

This would happen when cleaning the building by themselves is difficult, it is risky if security is not
there, etc.

1. Government of India has taken a very important step in containing the spread of
coronavirus by declaring lockdown of the nation. In the lockdown people have to stay
inside home so that they do not get affected by others and they do not affect others. The
lockdown would be successful only when all the citizens maintain strict self-isolation
inside their home. But it is difficult in densely populated areas where living space is very
small. People want to go out their home out of frustration. They would also like to go out
due to anxiety over food and other basic necessities. Moreover, people believe that if
some are staying inside then the purpose of lockdown would be satisfied. Explain the
failure of lockdown from the perspective of failure of collective action.
a. What kind of good is containment of coronavirus?
Ans. The containment of coronavirus is a public good. 1
The corona free world cannot be excluded from anybody (non-excludable). Also one
person is not rival to the other in containment of the virus. 1

b. What kind of public policy is lockdown?

Ans Lockdown is a command and control policy restrictions have been imposed by
the central government on the people to stay in quarantine to contain the spread of
the virus.
2

c. Explain the probability distribution of success of lockdown (staying inside home)

and the cost of lockdown.
Ans.
COST
P(r)

r*
It’s an accelerating function. 2
When first few people join the lockdown then the change will be minimum. There is
no containment if only a few people are staying indoors and the rest are roaming
around but the cost that these people bear w.r.t the economic losses, loss of life,
poverty, hunger etc that they have to suffer is huge. The effect of the lockdown will
take place only when a large number of people at r* will stay indoors and the
benefit will increase the cost.
2
 d. Explain when and why lockdown would not be successful.
Ans.
Lockdown will not be successful if r* people start free riding and think that they can
easily roam around because others are in quarantine. 2

Cost
P(r)

It is a decreasing function according to people’s perception. As the first few people

join the critical mass has reached and hence there is no need to stay indoors. They
mistakenly assume that the critical mass is very less 2

e. Suggest measures to make lockdown successful from collective action perspective

Ans.

Cost of lockdown should be reduced by various means

1. Provide food and other basic necessities are doorstep
2. Attend people in emergency
3. Cost of communication should be reduced through social media
2

This would reduce critical mass 1

1. Why do we not have a market for clean air? Can we create a market for clean air?
What are the major challenges for creating a market for clean air?
1+2+2

Ans:

Why do we not have a market for clean air?

We do not have market for clean air because clean air is non-excludable

1
Can we create a market for clean air?

Market for clean air can be created by making clean air excludable and rival in consumption.

0.5

Highest amount of carbon emission needs to be fixed.

0.5

Countries/ industries would be allotted some amount of permits of carbon emission

0.5

If countries / industries need more carbon emission permits beyond the allotted amount then they
need to buy it from others.

0.5

What are the major challenges for creating a market for clean air?

Fixing the maximum limit of carbon emission permits / credible commitment by countries to comply
with the limits may be difficult if countries do not reach consensus. This is a collective action failure.

Hence, they may not be able to cap the carbon emission permits due to lack of consensus and trade
subsequently

0.5

The projects created voluntarily to produce carbon permits / green environment may not be
maintained over time / functions may not be transparent.

0.5