Thursday, September 22, 2011
Ringo loves playing rock and roll at high volume?
ringo loves playing rock and roll at high volume. luciano loves opera and hates rock and roll. unfortunately, they are next door neighbors in an apartment building woth paper-thin walls. what is the externality here? what command-and-control policy might the landlors impose? could such a policy lead to an ineffiecient outcome?|||this refers to the Cose theorem, The two musics are mutually exclusive, so in the presence of clearly defined property rights, the two will negotiate a compromise, both parties are suffering from the negative externality (lack of liking) for the others music, both will put a price on their accommodation/music and the one who places the highest value on their present situation will negotiate to buy the cheaper one out.
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