Question

Your younger brother likes to listen to music in his room in the morning. The loud music disturbs you in the neighbouring room during your online classes.

A. Initially assume that he has the legal right to listen to music. Further, he gets a $50 benefit from the music he listens to, and you bear an $80 cost. If both of you bargain with each other, outline an efficient private solution.

B. Now assume that you have the legal right to peace and quiet during your online classes. Further, your brother gets an $80 benefit from the music and you bear a $50 cost. If both of you bargain with each other, outline an efficient private solution.

Answer 1

Your younger brother likes to listen to music in his room in the morning. The loud music disturbs you in the neighbouring room during your online classes.

Therefore, the loud music produces a negative externality on you. This problem can be solved through bargaining. But the bargaining solution depends on whether your brother has the right to listen to music or you have the right to peace during your online classes.

A. When he has the legal right to listen to music.

Your brother gets a $50 benefit from the music he listens to, and you bear a $80 cost from music.

The cost you bear is greater than the benefit by your brother ($80>$50). But he has the legal right to listen to music, so you have to pay your brother.

Since you bear a cost of $80, you are willing to pay anything less than $80 to stop the music. Since your brother gets a benefit of $50, he will accept anything more than $50 to stop music.

So the efficient private solution is that you pay some money more than $50 and less than $80 to your brother to stop music.

The final amount depends on the bargaining power of you and your brother.

B. When you have the legal right to peace and quiet during your online classes.

Your brother gets an $80 benefit from the music and you bear a $50 cost. Here, the benefit your brother gets is greater than the cost you bear ($80>$50). But you have the legal right to peace and quiet during your online classes, so in this case your brother will pay you to allow him to play the music.

Since you bear a cost of $50, you will accept anything more than $50 to allow him to play the music. Since your brother gets benefit of $80, he will pay anything less than $80, so that you allow him to play music.

So the efficient private solution is that your brother pays some money more than $50 and less than $80 to you, so that you allow him to play music.

The final amount depends on the bargaining power of you and your brother.

Therefore, from above situations, we have seen that legal rights affect that who pays whom.