Question

Barton and statler are neighbors in an apartment complex in downtown Manhattan. Barton is a concert pianist, and starker is a poet working on an epic poem. Barton rehearses his concert pieces on the baby grand piano in his front room, which is directly above Statlers study. The following matrix shows the monthly payoffs to Barton starker when Barton’s front room is and is not soundproofed. The soundproofing will be effective if only it is installed in Barton’s apartment.

Gains to Barton

Soundproofed: $100/month

Not soundproofed: $150/month

Gains to statler

Soundproofed:$150/month

Not soundproofed:$80/month

A. If Barton has the legal right to make any amount of noise he wants and he and statler can negotiate with one another at no cost, will Barton install and maintain soundproofing? (Choose one)

-(yes or no) Barton (will not or will) install soundproofing because:

Statlers cost of paying Barton to induce him to install soundproofing is (larger or smaller) than Statlers gain from soundproofing.

B. If statler has the legal right to peace and quiet and can negotiate with Barton at no cost, will Barton install and maintain soundproofing? (Choose one)

-(yes/no), Barton (will not or will) install and maintain soundproofing because:

Barton’s loss from installing sound proof is (larger or smaller) than the cost of paying off statler to allow for him to make noise.

Answer 1

A. Yes Barton will install soundproofing because:

Statlers cost of paying Barton to induce him to soundproofing is smaller than Statlers gain from soundproofing.

Explanation:

Barton will have to bear a loss of $50 if he installs soundproofing while Statlers will gain $70 if soundproofing is installed so Statler will induce hime to install soundproofing by paying him his loss i.e $50. So here Statlers cost of paying is less than the Statlers gain from soundproofing (i.e. $50 < $70)

B. Yes, Barton will install and maintain soundproofing because:

Barton's loss from installing sound proof is smaller than the cost of paying off statler to allow for him to make noise.

Explanation:

If Bartan has wants to make noise than he has to pay Statler $70 i.e the loss Statler will have when there will be no soundproofing ( $150 - $80 = $70) while if the soundproofing is installed then Barton will have a loss of $50 that is less than cost of paying to allow Statler to make noise (i.e. $50 < $70)