Explain how bargaining between parties involved will bring efficient solution results, regardless of who holds rights based on the example below:

A Houston Restaurant Bans Children after 7pm

The Coase Theorem* points out that if property rights are well-defined and easily enforced, what we ordinarily think of as externalities will be internalized. Here is a good example :

A Houston seafood restaurant announced that it won't allow children eight years old and under during dinner hours, citing complaints from customers.

La Fisheria, owned by Mexican television celebrity chef Aquiles Chavez, posted on its Facebook wall this short message about its new dinner guidelines:

After 7:00 pm, people over eight years old only.

For your understanding,

Thank you.

Chavez told the Houston Chronicle that the decision wasn't easy to make, nor did his wife agree with it. But he said he received enough complaints from customers about unruly children at dinner hours that it had to be done.

Chavez owns the restaurant and is estimating that the property will be worth more to him if he limits the hours when young children can be there. If he is correct, the reduction in business (after 7pm and earlier from those who are displeased with his policy) will be more than made up for by increased patronage by others after 7pm.

The poorly behaved children caused a negative externality -- they reduced the satisfaction for others dining there, and neither the children nor their parents compensated the losers. So Chavez internalized the externality.

Addendum: Ms Eclectic circulated this news item last week and was told by a young mother that sometimes the mother would like to ban her own children from their home dining room during meals.