Your neighbor plays loud music every night. The detriment to you of a sleepless night is valued at $3. The benefit to your neighbor of a night of loud music is $2. The two of you should be able to negotiate a quiet night if you offer to pay your neighbor

Question

Quizplus · Accepted Answer

Offering your neighbor $2.50 ensures that they receive more benefit from accepting the payment for a quiet night ($2.50) than they derive from playing loud music ($2). This makes the negotiation appealing to them while also being cost-effective for you, as it is less than the $3 detriment you face from a sleepless night.

Your Neighbor Plays Loud Music Every Night