6) Gina was in a garage band when she was in high school, and the only time they

Question

6) Gina was in a garage band when she was in high school, and the only time they could find to practice was on Saturday morning (much to the dismay of her neighbors.) Suppose the band received $49 in internal benefit (i.e., happiness) from practicing for the first hour, and this amount decreases by $10 per hour, each hour thereafter (i.e., $39, $29, etc.). Suppose also that the neighbors have a constant total cost (in terms of the sum of their collective irritation) of $20 worth of distress for each hour of practice. 6A) Will Coase bargaining be useful in such a situation? Explain. 6B) Left to their our own devices (i.e., without any parental or society intervention,) how long did Gina

Explanation / Answer

A)Coase bargaining will be useful since there are no transaction fees. The neighbors "get" an external annoyance. There are no ordinances against the loud noise, so there is no cause of action, but it still makes sense for the neighbors to pay the band to make it stop. B) If the parents and neighbors (society) don't intervene, the band will play for five hours. $49, $39, $29, $19, $9. If they played another hour, they would lose a dollar of happiness, so they stop after five hours. C) It is cost prohibitive for the neighbors to stop the band during the first hour ($49 and it is only worth $20 to make them stop) It is also cost prohibitive for the neighbors to stop the band during the second and third hours ($39 and $29 and it is only worth $20 to make them stop) The band will play three hours and then the neighbors will pay the band somwhere between $20 and $19 and the band will stop. (We should say probably, since the power could go off or something beyond parents and society could make them change their minds, for example, they might get better and then the neighbors might start to like the music)

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