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
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.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if property rights can be clearly defined and transaction costs are low, then the efficient outcome can be achieved through bargaining between the parties involved. In this case, since your roommate benefits from being messy but imposes a cost on you, it would be efficient for her to compensate you for the cost that she imposes on you. She could pay you at least $100 but less than $200 to live with the clutter, which would ensure that both parties are better off than if either of them were to move out.

Assume That Your Roommate Is Very Messy