RSM222H1 Lecture Notes - Lecture 7: Variable Cost, Snow Removal
23 Mar 2016
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Document Summary
Consider a simple example where an individual buys an oice building and rents the building to tenants. The owner of the oice building has a problem. She has to pay for common area maintenance (cam) costs such as: Lighing and heaing in the lobby and halls. Answers: owner paid something they did not use. Tenants" behavior: more waste (over-consume) since there is no costs. In terms of space, some got more, some got less, inequity exists if average rate. Tenants" behavior: over-consume since no mater how much they consume, they only paid for the average: the owner would assign as more costs as possible to the tenants since he/she would. If can directly traced to a speciic tenant, that tenant paid for it; if not, share the costs equally. (sharing based on square footage is more objecive and fair) Lighing and heaing in the lobby and halls: average sharing.
