Utility -U(I) Income Figure 5.9 10.A city is considering how much to spend monitoring parking meters.The following information is available to the city manager: Hiring each meter-monitor costs $10,000 per year i进. With one monitoring person hired,the probability of a driver zetting a ticket each time he or she parks illegally is equal to.25. iii. With two monitors hired.the probability of getting a ticket is.5. with three monitors the probability is75, and with four the probability is equal to 1 iv. The current fine for overtime parking with two metering persons hired is $20. a.Assume first that all drivers are risk-neutral What parking fine would you levy and how many meter monitors would you hire (1,2,3,or 4)to achieve the current level of deterrence against illegal parking at the minimum cost？ If driversare,their behavior is only by the exp ected fine the expected fine is $10=(0.5)($20).To maintain this expected fine,the city can hire one meter-monitor and increase the fine to $40,or hire three meter-monitors and decrease the fine to $13.33,or hire four meter-monitors and decrease the fine to S10 If th minimized is the ofhir monitorsie$10.000 per year,you as the city manager,shoul e the number of meter-monitors Hire only one monitor and increase the fine to $40 to maintain the current level o deterrence. b.Now assume that drivers are highly risk averse.How would your answer to (a)change？Utility Income U( I ) I* Figure 5.9 10. A city is considering how much to spend monitoring parking meters. The following information is available to the city manager: i. Hiring each meter-monitor costs $10,000 per year. ii. With one monitoring person hired, the probability of a driver getting a ticket each time he or she parks illegally is equal to .25. iii. With two monitors hired, the probability of getting a ticket is .5, with three monitors the probability is .75, and with four the probability is equal to 1. iv. The current fine for overtime parking with two metering persons hired is $20. a. Assume first that all drivers are risk-neutral. What parking fine would you levy and how many meter monitors would you hire (1, 2, 3, or 4) to achieve the current level of deterrence against illegal parking at the minimum cost? If drivers are risk neutral, their behavior is only influenced by the expected fine. With two meter-monitors, the probability of detection is 0.5 and the fine is $20. So, the expected fine is $10 = (0.5)($20). To maintain this expected fine, the city can hire one meter-monitor and increase the fine to $40, or hire three meter-monitors and decrease the fine to $13.33, or hire four meter-monitors and decrease the fine to $10. If the only cost to be minimized is the cost of hiring meter-monitors, i.e., $10,000 per year, you as the city manager, should minimize the number of meter-monitors. Hire only one monitor and increase the fine to $40 to maintain the current level of deterrence. b. Now assume that drivers are highly risk averse. How would your answer to (a) change?