What would be the economic rationale for homeowners associations ...

[TVarnum]

What would be the economic rationale for homeowners associations to host yard of the month awards?
 
  What will be an ideal response?

Question 2

Economists assume that rational behavior is useful in explaining choices people make
 
  A) because irrational people do not make economic choices.
  B) because individuals act rationally all the time in all circumstances.
  C) even though people rarely, if ever, behave in a rational manner.
  D) even though people may not behave rationally all the time.

[zenzy]

Answer to Question 1

Homeowners associations clearly view beautiful yards as something desirable for the neighborhood. They not only provide direct benefits to those who keep up their yards but also bestow benefits on the rest of the residents as well. However, individual homeowners are not likely to take into account the positive externality they provide. As a consequence they are likely not to keep their yards as beautiful. The yard of the month award is an effort to get them to recognize those benefits. To the extent that those who participate make their yards more attractive, this helps to bring the beautification of the neighborhood to a more efficient level.

Answer to Question 2

D