Market Clearing Price of Unloading The Dishwasher
June 3, 2008 12:02 amMy roommates and I do a decent job of keeping our apartment clean, but there’s definitely room for improvement in our systems. The problem is that cleaning our apartment is a public good, and like any public good, there’s tons of room for free-riding. Anyone who has ever had roommates has most likely dealt with dirty dishes in the sink, or papers on the table, or piles of unread mail. Unfortunately, my brilliant idea, described below, is something only an economist could love, and I live with lawyers.
The solution to our problem, of course, is to attach a price to the various household chores we want done and compensate the person who accomplishes the task by having the other two roommates pay him. I struggled with how to set the optimum level of payment for each task. We could have each person decide how much they’d pay for the task, but what if nobody wanted to work at that level? An alternative is to say how much each person wants to charge, but what if nobody pays it?
Co-op housing attempts to solve this problem through a system of fines and penalties, but if the fines are too low, then it will be seen as a charge for the service and not a penalty (thanks behavioral economics!). You can force compliance by making the charges too high, but then there’s an opportunity for trade - between people who want to clean or need money and those who don’t - that’s being missed.
The optimal solution goes back to game theory - which teaches us how to incent both action and truth-telling. There’s a classic problem in game theory where two business partners are trying to split a pie, or their company, or something. Anyways, two people are trying to split something - and the best way to find an equitable split is to have the first player propose how much the pie/company is worth to them, and the second player decides whether to buy them out at that price, or sell to them at that price. Because Player One doesn’t know which option Player Two will choose, they want to be as honest as possible about their true value of the pie/company/something, and will be indifferent between the two options.
The same goes for cleaning the apartment. Give one roommate the option of saying what they value the chore at. The other roommate has the option of either completing the chore at that price, or they can pay to have it done. Running through the register of household cleaning tasks should create an equitable outcome, or give one roommate some supplemental income as a maid. Either way, everyone wins - we all get to live in a clean apartment.
How’s this for a long post, Mom?
Categories: Behavioral Economics, Crazy Theories, Governance, Incentive Centered Design, Information Economics, Strategy
3 Responses to “Market Clearing Price of Unloading The Dishwasher”
Nice, very nice. So how much is it worth to have me cook, clean, turn down your bed and put mints on your pillow? Hilton bucks? Marriot dollars? Or, as some have suggested for years, this is the Ritz and out of your league? ILY
Are all roomates equally contributing to creating that public good mess? For example, if one roomate is gone traveling 2/3rds of the week, and doesn’t contribute to as much dish usage, or general mess, should that factor into the equation? Or if a roomate never uses dishes because they eat out all the time. Both general mess and dishes are typically considered public domain, but if one person essentially doesn’t contribute to that public mess 2/3rds of the week, should that person have less responsibilty for cleaning? How do you weight contribution?
Great question, Anonymous Poster. For something like dishes, it’s pretty easy to assign ownership and enforce responsibility, so while the “cleanliness” is still a public good, its easier to figure out who needs to maintain it. You could use the above system, but “clean your own dish” would probably work, the only problem being enforcement.
For something like sweeping, or dusting, though, where it’s a true public good, the market system would work pretty well. The traveling roommate would contribute less to the mess, but because they aren’t there as often, they’d also likely set a lower value to having the place clean. Granted, nobody wants to come back to a shitty apartment, but in dollar terms, whats that worth to you? Under the above system, you set that price, and either pay it to the other roommate, or to a third party who will do the cleaning.
Clearly there’s still some kinks that need to be worked out in the idea before anyone tries to implement it, and I wouldn’t suggest using it with a live-in girlfriend. The economic logic might hold, but a “pareto optimal” living situation isn’t the same thing as a happy one (that’s why you have to put the toilet seat down).
Care to comment?