## April 8, 2010

### A problem of economics

Last week was a perfect example of an economic problem. My friend, David, wanted to get out of vacuuming my room, a task he had to perform as part of a contract because I had won his services in an auction. He wanted to get out of the services, and instead wanted to compensate me $6 in order to not vacuum at all. I countered with an offer of$3 paid to me, as well as one of the two vacuuming tasks he was obligated to perform. He did not want this offer, but I preferred it to receiving $6, and he preferred it to the$20 I set as the threshold for not receiving any vacuuming services.

In essence, I valued his one vacuuming at $3 and his second one at$0. I wanted the room vacuumed, and that was worth $17 to me. That is, I wanted to be compensated for the loss of the service and for the price of actually having to vacuum the room. Of course, despite another offer for a third friend, Jusvin, to vacuum the room for$17 and for David to pay me \$3, David ended up accepting my first offer. Thus we all rationally reached a beneficial conclusion for everyone. Except for Jusvin.