Two households have to decide whether to build a swimming pool on a piece of common
property situated between the two houses. Building the swimming pool costs $70. The
value of the swimming pool is uncertain. There is a fty percent chance that it is
worth $80 to a household and a fty percent chance that it is worth $0. The swimming
pool is worth building as long as one household likes it. The problem is that each
family only knows how much the swimming pool is worth to itself. In order to induce
truth-telling, the families decide to use a voting scheme so that the swimming pool
is built with a probability of x% when only one family votes for it. See the following
table. It is easy to see that if x = 0, a household will vote for the pool if and only if it
likes have a swimming pool. What is the maximum value of x that is consistent with
truth-telling?
Household 1 Household 2 Swimming Pool H1 pays H2 pays
Y Y Y $35 $35
Y N x% $70 $0
N Y x% $0 $70
N N N $0 $0