The Impact of Refunds on Neighborhood Beautification
7. Gruber 7.4
People in my neighborhood pay annual dues to a neighborhood association. This association refunds neighborhood dues to selected homeowners who do a particularly nice job in beautifying their yards.
a. Why might the neighborhood association provide this refund?
If the neighborhood association provides a refund to homeowners who do a nice job beautifying their yards, they are providing an incentive for other neighbors to beautify their own yards and a subsidy to make the neighborhood beautiful. By providing more of this good, they provide with a positive external social benefit for the whole neighborhood.
The neighborhood association collects annual dues with the purpose to provide external social benefit. If the neighborhood looks
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