Roommate Economic Bargaining
Tyler writes:
Bargaining with your roommates
Joseph, a loyal MR reader, asks:
I recently leased my first apartment…with a friend who just graduated from college with me. It’s a nice apartment, and spacious, but it has one bedroom that is larger and nicer (better views, bigger closet, more windows) than the other.
We’re looking for the most equitable way to allot the good bedroom without resorting to cash transfers (too crass). We’ve come up with a few strategies so far:
1. Bid on the good room with chores (meaning the person who is willing to do the most domestic chores to compensate wins the auction and the room)
2. Best out of seven rocks-papers-scissors
2. Series of challenges submitted by close friends.#1 seems like the best option we’ve come up with so far, but I’m afraid of winner’s curse. I don’t want a resentful roommate.
Do you think there’s a better solution?
Adam, another reader, asks, in a separate email, how friendly roommates should allocate the rights to joint furniture purchases.
I suggest the crass cash transfers!!
I agree. I witnessed a situation where 6 or so people were moving into an apartment and could all afford the average cost of rent + bills. However, when the size of the rooms were taken into account, the high variance in the size of the rooms led to a very high cost per room for a couple of the larger rooms that no one wanted to pay. These being very lefty types; I was surprised when they turned to an auction-like system to assign prices to rooms based on the willingness to pay for the extra square footage. The system worked wonderfully, and everyone ended up happy. Their recognition of the diminishing marginal utility of the extra space allowed them to create a market based solution which ended up being more fair than the constant dollar/square foot (ostensibly, more fair) solution.
One of Tyler’s commenters brings up the classic game theory solution: One person assign prices (cut the cake) the other person chooses the room (slice). However, I’m not too sure how to scale this to more than 2 people.
