Problem #1 Part a. There are two decision rights allocations that are affecting this tragedy of the commons. The first is that students’ parking permits allow them access to any parking spot at any time of day, regardless of the level of congestion. One student’s use of a parking space confers an obvious private benefit, while it also imposes a social cost on the other students in the form of one less parking space available. Second, professors have the right to schedule their classes when they see fit. When a professor schedules her class, she is likely considering how its timing affects her schedule, and weighing the benefits of holding class in the late morning or early afternoon. What she is unlikely to consider is the cost she is imposing on students outside her class in the form of increased demand for parking at that time, and a corresponding lack of available parking spaces. The tragedy will almost certainly manifest itself in the form of high parking congestion during the late morning and early afternoon. (Ironically, outside these times the parking lot may actually be underutilized.) Many students will hold parking permits, but the permits will do them little good when there are so many other students taking up the available spaces. Some students may resort to arriving at campus well before their classes start in an effort to beat the rush, which would impose a potentially significant opportunity cost on their time and intensify the commons tragedy. The commons tragedy could be alleviated through several potential mechanisms. Raising the price of parking permits would reduce the number of permits sold, resulting in fewer “owners” of the common resource. Students would have a strong financial incentive to buy a permit as a group and carpool to campus. A variation on this would be to sell specific permits for different parking structures, making the more desirably located structures more expensive to park in. The nature of the decision rights conferred by the permits might also be changed in other ways. For instance, a permit may only allow a student to park on campus for 4 hours during the day, or only on certain days of the week, or certain times of day. Finally, the scheduling rights of the professors could be curtailed as well, and the University could force some professors to schedule classes earlier in the morning or later in the day. Alternatively, financial incentives could be provided, with professors offered some additional stipend for voluntarily scheduling courses outside of the very popular hours. Part b. The potential for an anticommons problem is driven by the fact that each critical function in the business process is under the jurisdiction of a separate union, any of which could call a strike and slow business considerably, or even bring it to a halt. The tragedy will likely manifest itself in the form of long, costly negotiations between Vitesse and the unions, and fairly frequent strikes. Each union has an incentive to demand a significant share of the available surplus in the form of high wages, lax work rules, short work days and high levels of job security. If all of the unions bargain too hard (and from time to time, they are bound to), Vitesse will not be able to give all of them what they want and still remain profitable. Vitesse might be able to alleviate its anticommons tragedy by reducing the number of unions it must negotiate with. For instance, engineers and accountants are both white‐collar jobs, and would likely have similar interests. It may be possible for their two unions to merge. Similarly, the manufacturers,

truck drivers and maintenance crews are all blue‐collar jobs, also with similar interests. A merge of their unions may be possible as well. This would result in just two parties for Vitesse to negotiate with. Even if union mergers were not possible, Vitesse the unions might be willing to negotiate jointly, which could reduce the likelihood of a strike. Vitesse could also discourage hard bargaining from its unions by trying to create some competition (i.e., break down the unanimity requirement). For instance, if there is more than one engineers’ union, Vitesse could threaten to switch the union it does business with if there is a strike. It might even be able to threaten to hire non‐unionized labor (although France’s labor laws would likely not allow it). Even if neither of these is a viable option, the company might be able to introduce competition by building any new factories in other countries, such as Germany or the United States. This would allow it to shift some of its production to its foreign holdings if a strike was holding up domestic production (and vice versa).