Interdependent Binary Choices
| Interdependent Binary
Choices.*
Consumers' action affects supply and demand simultaneously. Hard to predict actions of others Hard to contract to control others' choices. |
1. Markets--
Marked by individually piecemeal marginal choice. |
1. The aggregate result
preferred by most is not achieved (e.g. 50-50 mix of genders). No equilibrium. |
| Schelling's examples of
Mixing and Sorting: Dorm gender. Racial mix. |
2. Administration -
Location is assigned |
2. Achieve some desired
dimension (e.g. 50-50), but lose individual choices. |
| Problem is not IUG
resource scarcity primarily. |
3. Status--
e.g fraternity-sorority Hour dances (mixers). |
3. Achieve desired aggregate
and participants learn to regard the process as natural - just the way things are. |
| * It is not like MPD where there is a dominant choice regardless of the acts of others. Here there is a marginally preferred choice which apparently moves the individual closer to the preferred outcome, but has an undesired outcome when combined with similar acts of others whose volume is not predictable. | ||