If the both Peter and John could negotiate a settlement, but the cost of making a transaction for Peter were $5 (he is very shy and does not like to talk to strangers) , how many phone calls would John end up making if he (John) had the rights to make any cell phones he liked at the coffee shop?
A)2
B)0
C)1
D)3

Question

Quizplus · Accepted Answer

Since Peter is not willing to talk to strangers, John will have to make the phone call to negotiate the settlement. As John is able to make any cell phone calls he likes at the coffee shop, he doesn't have to worry about transaction costs. Therefore, John will only make one phone call to negotiate the settlement.

If the Both Peter and John Could Negotiate a Settlement