New England Company plans to build a power plant on the Charles River.By using river water to cool its plant,the river's water temperature will rise enough that trout will no longer survive,much to the dismay of local fishers.The loss of value to the fishers is estimated as $100,000.The transactions costs of a side payment from either side to the other are prohibitive of any agreement.Therefore,if the property right to the water is worth

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If the property right to the water is worth more than $100,000 to New England Company, efficiency dictates giving the right to New England Company. This is because the value of the property right is greater than the loss to the fishers, and giving the right to New England Company would result in greater gains overall. In this case, the fishers would need to find alternative fishing opportunities or be compensated in some other way for their loss. Since the transactions costs of a side payment are prohibitive, assigning the property right to New England Company would be the most efficient solution.

New England Company Plans to Build a Power Plant on the Charles