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Explore a simple example of the free rider problem

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Let us explore a simple example of the Free Rider problem:

Suppose that you and 3 of your friends go to Doyles Seafood at Watsons Bay for lunch. As a group, you decide to order one main each and share the food. You also decide to split the bill evenly. Mains cost between $35.33 and $51.78 each. Suppose that your utility function is given by the following function: U(X) = X^2 where X is the total value of food ordered.

Supposing that your friends follow your lead and order mains of equivalent value to the one you order, what is the price of the main (call this x) which maximises your net utility (i.e. Utility less cost)?

Reference no: EM132503164

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