Do you get annoyed when someone boards the elevator with you only to ride up one floor? The stairs are right there, could they not just walk up a single flight? Well, consider this. Someone boards the elevator on the first floor with a 3rd floor destination, but instead of getting off at floor 2 and walking the last flight of stairs, they ride all the way to 3.
Doesn’t seem as annoying, right? So what explains the difference? It can’t be that you are just appalled at their laziness. Because riding to floor N rather than getting of at N-1 is just as lazy. It must be the externality.
Getting on the elevator only to ride up a single floor delays everybody else. The decision to ride to the second floor rather than the third isn’t the same because whichever he chooses the elevator is going to have to stop once.
Ah, but what if he gets on, floor 2 is already pushed but 3 is not. Then the tradeoff is the same. Because if he were to get off at floor 2 and walk he would spare everyone else the additional stop at 3. So you get annoyed at a single-floor rider you if and only if you get annoyed at this marginal-floor rider.
Well, not quite. Becuase there is one more difference. After he makes the sunk decision to get on the elevator, but before he makes the marginal decision, the problem changes. In particular, as he is riding he gains some new information: he can observe how many other people get on the elevator and are going to be affected by his decision.
This puts the marginal-floor rider in a different position than the single-floor rider in terms of social welfare. Because the single-floor rider’s decision whether to board at all is made without knowing how many other riders will be on the elevator. The marginal-floor rider can condition his decision on the number of riders.
Indeed, this means that you may even have cause to forgive Mr. Single-Floor and yet be annoyed at Ms. Marginal-Floor. He may have reasonably expected that few people, if any, were going to be inconvenienced. But if it turns out that the elevator is nearly full then the sum total of their delay due to Mr. SF’s decision to board is a sunk cost, but it’s an avoidable cost for Ms. MF. If she doesn’t get off at 2 and walk an extra flight, you all have plenty of reason to be annoyed.
This is all very important.
Also, this explains the otherwise inexplicable glass elevators, and raises the puzzle of why we don’t see them in office buildings.