Question

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets a $200 benefit from being messy but imposes a $100 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to

Answer 1

Answer: b. pay you at least $100 but less than $200 to live with the clutter.

Step-by-step explanation:

The options are:

a. stop her messy habits or else move out.

b. pay you at least $100 but less than $200 to live with the clutter.

c. continue to be messy and force you to move out.

d. demand payment of at least $100 but no more than $200 to clean up after herself.

According to the Coase theorem, if a party has the rights to a property, then an efficient output level will be achieved when there is some sort of bargaining between the parties that are involved.

Since the roommate gets a $200 benefit from being messy but imposes a $100 cost on me, an efficient solution would be for my roommate to pay me at least $100 but less than $200 to live with the clutter.