You live in a dorm that has parties every Friday night. Loud parties. The neighb

Question

You live in a dorm that has parties every Friday night. Loud parties. The neighbors complain. You discover that each of the 150 partygoers would be prepared to pay $1 (but not more) to ensure that the neighbors let the party go ahead. It turns out that the neighbors would be satisfied with $100, which covers the cost of going out to dinner in a quiet place while the party rages on.

a. What is the efficient outcome? [i.e. should the party proceed?]

b. If there is a city ordinance that bans any parties when the noise level is so high that the neighbors object, what will happen?

c. If there is no such city ordinance, so one is allowed to have loud parties, what will happen?

d. Now you discover that the partygoers would be prepared to pay just $0.50 (but not more) to ensure that the party goes ahead. What are the answers to a., b. and c. in this case?

e. Explain how your answers to a.-d. illustrate the workings of the Coase theorem?

Explanation / Answer

You live in a dorm that has parties every Friday night. Loud parties. The neighb

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.