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Coase and Noise Pollution: Vivian is trying to learn to play the violin, much to the dismay of her housemates. Vivian and her roommates are willing to bargain over her practice time, and will split the difference between the willingness to pay for noise reduction and the willingness to accept it. The following table shows her marginal benefits from playing for one to five hours as well as the marginal external cost incurred by her housemates (constant at $5 per hour).

Hour 1 2 3 4 5
Marginal benefit to Vivian $10 $8 $6 $4 $2
Marginal external cost $5 $5 $5 $5 $5

a. Vivian will practice Suppose Vivian has the property rights to make as much noise as she likes. How many hours will Vivian practice? Who gets how much money?

b. Suppose the housemates have the property rights to a quiet house. How many hours will Vivian practice? Who gets how much money?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M961076

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