Economics of commission

Posted on December 31st, 2007 in wonder why - 0 comments

Here is a question for all you game theory enthusiasts

Imagine you are planning to rent an apartment from PACiM (Popular Apartment Complex in Madras). Since the PACiM lease office is nice they give reference commission to any tenant who brings a new person for renting a house there. The good thing is you have quite a few number of friends (lets say x of them) who are living in PACiM. So you called up one of them and asked if he could refer you so that both of you can share the commission. He was more than happy for this arrangement. You both initially agreed on a 50:50 share of the reference commission. Somehow the news leaked to all of your friends in PACiM. For analysis purpose you can assume that all of them are rational. So one of them called you up and offered a better deal. Soon the another friend called you up and she is ready to offer the best deal for commission sharing.

Now the question, “how much % of commission do you think you will get?”

Bonus question: “how much % of commission you will get if there is a condition that each tenant can only refer one person per calender year?” (assume that there is a constant demand for new rentals and all the future residents have friends in PACiM)

In case you need to simulate the game, visit gamethoery.net’s interactive section

Written by Chandoo
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