Al regularly rehearses accordion music on his back deck with members of his musical troupe, the Starland Polka Band. Practicing on his deck saves him the $500 per year it would take to rent a rehearsal space. Unfortunately, practicing on his deck keeps his neighbor, Marcy, awake at night. The value of Marcy's lost sleep is $600 per year.

a. Is it efficient for Al to rehearse on his back deck? Explain your answer.

b. If the law says that it is illegal for Al to rehearse on his back deck, will Al end up practicing there? What might Marcy do to try to stop him?

c. Suppose that the law says it is legal for Al to rehearse on his back deck.

i. How much is Marcy willing to pay to get him to stop?

ii. What is the minimum amount of money Al is willing to accept in exchange for his silence?

iii. If possible, craft a bargain between Marcy and Al that results in his silence. Show that the bargain (if possible) makes both parties better off.

d. Given your answers to (b) and (c), does the outcome of this conflict depend on the law? Is the outcome consistent with your answer to (a)?

e. Suppose that instead of doing $600 damage to one neighbor, Al does $1 damage to 600 neighbors. Are those 600 neighbors as likely to be able to convince him to stop as easily as Marcy can? Explain.