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(2020 Spring Exam Q66) Li can produce with or without a filter on his smokestac...
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(2020 Spring Exam Q66) Li can produce with or without a filter on his smokestack. Production without a filter results in greater smoke damage to Fung, say to Fung’s health.
| Li produces with filter | Li produces without filter | |
|---|---|---|
| Gains to Li: | $263 | $287 |
| Damage to Fung: | $26 | $34 |
Suppose the property right is well assigned to either parties. When the negotiation cost for the two parties to reach an agreement is zero, we would expect Li to produce [ Answer ] filter.
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