Suppose that Billy McGee owns the Internet domain www.ironmaiden.com. Iron Maiden, the legendary British heavy metal band, was given the rights to the name by the World Intellectual Property Organization. Iron Maiden values the domain name at $250,000 and Billy McGee values the domain name at $330,000. The Coase theorem suggests that:
A) Billy McGee will pay Iron Maiden between $250,000 and $330,000 to keep the domain name.
B) Billy McGee will pay Iron Maiden more than $330,000 to keep the domain name.
C) Iron Maiden will take the domain name.
D) Iron Maiden will buy the domain name from Billy McGee for less than $330,000.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that the party with the lower valuation will pay the other party to avoid a costly legal battle. In this case, Billy McGee has the lower valuation, so he will pay Iron Maiden to keep the domain name.

Suppose That Billy McGee Owns the Internet Domain Www