Microeconomics: Principles, Applications, and Tools (8th Edition)

by O'Sullivan, Arthur; Sheffrin, Steven; Perez, Stephen

Published by Prentice Hall

ISBN 10: 0-13294-886-9

ISBN 13: 978-0-13294-886-9

Chapter 15 - Public Goods and Public Choice - Exercises - 15.2 Private Goods with External Benefits - Page 353: 2.8c

Answer

One

Work Step by Step

Each company will be indifferent about providing free LoJack systems when the benefit it captures equals the \$100 cost. That happens when the company has at least 1% market share per \$1 of benefit. So if the total benefit from LoJack is $100, the threshold is: 100%/100=1 company Thus, the threshold number of companies is 1. If there are more than one, each captures less than the full benefit, and the incentive to provide LoJack drops.

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