ECO320Y5 Study Guide - Midterm Guide: Bylaw Enforcement Officer, Nickelback, Marginal Cost
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Tutorial 3 - monday, january 27, 2020 question 1: adam plays nickelback tapes in his backyard that drives his neighbour blair crazy. Blair can call a bylaw enforcement officer to stop adam. Adam can stop playing nickelback or buy earphones. There is no scope for bargaining that would make it possible for adam to make blair better off if he played nickelback. If bargain = . 00 then each party gains . 00. This is assuming equal split unde nash"s theorem. Maximum legal fee either party would pay is . 95 (in canada!). Scope for bargaining still lies between . 00 and 600. 00 wherein lies the payment the group might make to adam to stop playing nickelback, but it would be more difficult for the neighbours organize or agree to pay adam. Some members of the group would free ride on the elimination of nickelback. This makes a bargain less likely, so adam continues to play nickelback.
