owns a dog whose barking annoys 's neighbor Jane. Suppose that the benefit of owning the dog is worth $700 to and that Jane bears a cost of $500 from the barking. Assuming has the legal right to keep the dog, a possible private solution to this problem is that

Question

owns a dog whose barking annoys 's neighbor Jane. Suppose that the benefit of owning the dog is worth $700 to  and that Jane bears a cost of $500 from the barking. Assuming  has the legal right to keep the dog, a possible private solution to this problem is that

a. There is no private solution that would improve this situation. 
b. Jane pays  $650 to get rid 
of the dog. 
c. Jane pays  $800 to get rid of the dog. 
d.  pays Jane $600 for her 
inconvenience.

-Can private solutions always be reached with the Coase Theroem? 
-But in this case  has the legal rights, so does it mean he could chose not to pay Jane any money? so the answer would be A?

I agree, I too would go with a)

Bot · Answer

There is no private solution that would improve this situation. The Coase Theorem states that if transaction costs are low, private solutions can be reached. However, in this case, has the legal right to keep the dog, so there is no incentive for him to pay Jane any money. Therefore, there is no private solution that would improve this situation.