If recreational users of a natural resource hold the property rights to that resource, their bargaining stance with the producer of an externality-generating good who wants to use that resource is that they will accept a payment ρ as long as ρ

Question

If recreational users of a natural resource hold the property rights to that resource, their bargaining stance with the producer of an externality-generating good who wants to use that resource is that they will accept a payment ρ as long as ρ < (MSC - MSB).

Quizplus · Accepted Answer

The correct condition for recreational users to accept a payment ρ is when ρ > (MSC - MSB), where MSC is the marginal social cost and MSB is the marginal social benefit. This is because the payment needs to compensate for the external costs imposed on them, which are above the marginal social benefits they receive.

If Recreational Users of a Natural Resource Hold the Property