Siobhan loves it when there are dried flowers in the kitchen, but Anna hates it.Anna puts a value of $12 on having a flower-free kitchen, while Siobhan puts a value of $14 on having the flowers.If Anna has the right to a flower-free kitchen, whose position will win out?

Question

Quizplus · Accepted Answer

Given that Siobhan values the presence of flowers at $14 and Anna values a flower-free kitchen at $12, Siobhan is likely to offer Anna compensation to allow the flowers, potentially more than $12 but less than $14, making both better off. This is an example of the Coase Theorem in action, where private bargaining can lead to an efficient outcome regardless of the initial distribution of rights, as long as transaction costs are low.

Siobhan Loves It When There Are Dried Flowers in the Kitchen