(Consider This) Darcy and Rachel live down the hall from each other in the same dorm. Darcy likes to play her music loudly down the hall, and Rachel finds the music annoying. A Coase theorem solution for this problem would be for
A) Darcy and Rachel to negotiate a mutually agreeable level of volume and/or selection of music.
B) the director of housing to impose a fine on Darcy whenever she plays her music too loud.
C) the dorm government to set a payment schedule by which Rachel would compensate Darcy for making her play her music at a lower volume.
D) the college to ban the playing of music in dorms.

Question

Quizplus · Accepted Answer

The Coase theorem states that if transactions costs are low and property rights are well-defined, then bargaining between the two parties involved will lead to an efficient outcome regardless of who is initially assigned the property right. In this scenario, Darcy has the property right to play her music loudly, but Rachel finds it annoying. To reach an efficient outcome, they should negotiate and find a solution that is mutually agreeable, such as a compromise on the volume or selection of music. This allows both parties to benefit and can be reached without the need for outside intervention.

(Consider This) Darcy and Rachel Live Down the Hall from Each