Suppose that Pat has the legal right to fly an extremely noisy airplane over Chris's apartment and that he values that right at $1,000 per year.Chris would be willing to pay $1,200 per year to avoid the noise.In that case

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Both Pat and Chris have economic incentives to reach an agreement that benefits both of them. Pat values the right to fly over Chris's apartment at $1,000 per year, while Chris values the elimination of the noise at $1,200 per year. Therefore, they can come to an agreement where Chris pays Pat anything less than $1,200, and both parties will benefit. This type of agreement is known as a Coase Theorem. There is no need for any external intervention by a governmental agency or for Chris to move to a new apartment.

Suppose That Pat Has the Legal Right to Fly an Extremely