Consider the situation described in Table 3.4 under the legal rule that the victims (the citizens) are entitled under the damages remedy. Describe how the Coasian bargaining process would proceed and discuss the efficiency of the expected final outcome.

Table 3.4

Transcribed Image Text:

Production Level (Truckloads) 0 1 2 3 4 Total Profit 0 4,000 7,000 9,000 10,000 Total Damage 0 500 1,500 4,500 9,500 Total Profit Minus Total Damage 0 3,500 5,500 4,500 500 Marginal Benefit (Additional Profit) 4,000 3,000 2,000 1,000 Marginal Cost (Additional Damage) 500 1,000 3,000 5,000