Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

Question

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Jenny could pay Abe $300, which is more than the benefit Abe receives from the dog ($200) but less than the cost Jenny bears ($400), to give the dog to his parents. This would make both parties better off.

Abe Owns a Dog; the Dog's Barking Annoys Abe's Neighbor