Question: 5. Now, consider the case with warm glow where each person cares about his contribution to the driveway rather than his consumption of driveway. Specifically,

5. Now, consider the case with warm glow where each person cares about his contribution to the driveway rather than his consumption of

5. Now, consider the case with warm glow where each person cares about his contribution to the driveway rather than his consumption of driveway. Specifically, wi(Ci, di) = ln(ci) + y ln(di). Find the private optimal income share with warm glow, SW. Compare SW and . Explain intuitively. (10 pts) 6. Now suppose 11 > 12. Specifically, 11 MI2 but y1 = 72 = 7. Find the social and private optimal level of income share: i and 81. What happens if M +0. Explain intuitively. (10 pts) == = = 7. Now suppose I1 12 but 71 M72. Find the social and private optimal level of income share: i and 81. What happens if M +00. Explain intuitively. (10 pts) 5. Now, consider the case with warm glow where each person cares about his contribution to the driveway rather than his consumption of driveway. Specifically, wi(Ci, di) = ln(ci) + y ln(di). Find the private optimal income share with warm glow, SW. Compare SW and . Explain intuitively. (10 pts) 6. Now suppose 11 > 12. Specifically, 11 MI2 but y1 = 72 = 7. Find the social and private optimal level of income share: i and 81. What happens if M +0. Explain intuitively. (10 pts) == = = 7. Now suppose I1 12 but 71 M72. Find the social and private optimal level of income share: i and 81. What happens if M +00. Explain intuitively. (10 pts)

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