Exploring the Incentives

15. A number of years ago, the farmers in one of the Caribbean nations were having a problem with snakes that ate chicken eggs. To solve the problem, the government instituted a bounty on the snakes. The program worked well at first, but then the authorities noticed that rather than decreasing, the number of snakes being turned in was increasing. Investigating, they found that the bounty had been set too high. What unwanted incentive would very high bounties give people?

16. Two miners are having an argument over who has the slower mule. They decide to settle the argument with a race to the nearest saloon; the owner of the mule that arrives first will buy the drinks for the other miner. They each get on their mules and do nothing. An economist finds them two hours later, neither having moved a foot. He asks what their problem is. They get down off their mules and explain the situation to him. He thinks about the situation a few seconds and says two words. The miners immediately jump back on the mules and race off to the saloon. What did the economist say to resolve this problem? (Comment: This problem is adapted from a similar story in David Friedman's Hidden Order: The Economics of Everyday Life.)

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