Law and Economics-Charles W. Upton Applying The Coase Theorem.
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Transcript of Law and Economics-Charles W. Upton Applying The Coase Theorem.
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Law and Economics-Charles W. Upton
Applying The Coase Theorem
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Applying the Coase Theorem
Sturges v. Bridgeman
• For more than 60 years, a confectioner used two mortars and pestles. A doctor moved next door.
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Applying the Coase Theorem
Sturges v. Bridgeman
• For more than 60 years, a confectioner used two mortars and pestles. A doctor moved next door.
• All was peace and harmony, until the doctor built a consulting room right against the kitchen.
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Applying the Coase Theorem
Sturges v. Bridgeman
• For more than 60 years, a confectioner used two mortars and pestles. A doctor moved next door.
• All was peace and harmony, until the doctor built a consulting room right against the kitchen.
• The court ruled for the doctor, but the ruling makes no difference.
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Applying the Coase Theorem
Doctor Wins
BConsulting Room > BMortar and Pestle
Doctor Stays, no money
changes hands
Yes
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Applying the Coase Theorem
Doctor Wins
BConsulting Room > BMortar and Pestle
Doctor Stays, no money
changes hands
Yes
No Doctor moves, money
changes hands
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Applying the Coase Theorem
Doctor Loses
BConsulting Room > BMortar and Pestle
Doctor Stays, money
changes hands
Yes
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Applying the Coase Theorem
Doctor Loses
BConsulting Room > BMortar and Pestle
Doctor Stays, money
changes hands
Yes
No Doctor moves, no money
changes hands
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Applying the Coase Theorem
Doctor Wins or Loses
BConsulting Room > BMortar and Pestle
Doctor StaysYes
No Doctor moves
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Applying the Coase Theorem
Doctor Wins or Loses
BConsulting Room > BMortar and Pestle
Doctor StaysYes
No Doctor moves
All that is at issue is whether money changes
hands.
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Applying the Coase Theorem
Cooke v. Forbes
• Coca nut fiber matting was hung out to dry after being bleached.
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Applying the Coase Theorem
Cooke v. Forbes
• Coca nut fiber matting was hung out to dry after being bleached.
• The fumes were dreadful.
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Applying the Coase Theorem
Cooke v. Forbes
• Coca nut fiber matting was hung out to dry after being bleached.
• The fumes were dreadful.
• The neighbor asked for a restraining order.
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Applying the Coase Theorem
Cooke v. Forbes
• Coca nut fiber matting was hung out to dry after being bleached.
• The fumes were dreadful.
• The neighbor asked for a restraining order.
• He did not get it, but got the right to sue for damages when the smell occurred.
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Applying the Coase Theorem
Neighbor Wins or Loses
BFumes > Bpeace and Quiet
Mats StayYes
No Mats Go
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Applying the Coase Theorem
Neighbor Wins or Loses
BFumes > Bpeace and Quiet
Mats StayYes
No Mats Go
All that is at issue is whether money changes
hands.
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Applying the Coase Theorem
Bryant v. Lefever
• Two houses of the same size. One house was torn down and rebuilt. It then caused the chimney of the original house to smoke.
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Applying the Coase Theorem
Bryant v. Lefever
• Two houses of the same size. One house was torn down and rebuilt. It then caused the chimney of the original house to smoke.
• Bryant sued and won £40 in damages. The appeals court reversed on grounds that the plaintiff was causing the damages.
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Applying the Coase Theorem
Bryant v. Lefever
• Two houses of the same size. One house was torn down and rebuilt. It then caused the chimney of the original house to smoke. He sued and won £40 in damages. The appeals court reversed on grounds that the plaintiff was causing the damages.
But who really caused the problem? Both did. The
decision is one of setting property rights, not in terms of determining the ultimate
decision.
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Applying the Coase Theorem
Bass v. Gregory
• The Cellar of the Jolly Angler was used for brewing and the air was then vented into an abandoned well on the property of the neighbor.
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Applying the Coase Theorem
Bass v. Gregory
• The Cellar of the Jolly Angler was used for brewing and the air was then vented into an abandoned well on the property of the neighbor.
• The defendant boarded up the well, and thus rendered the Cellar unusable.
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Applying the Coase Theorem
Bass v. Gregory
• The basic question was whether the Jolly Angler had the right to a current of air.
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Applying the Coase Theorem
Bass v. Gregory
• The basic question was whether the Jolly Angler had the right to a current of air.
• The court said yes, using the doctrine of lost grant.
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Applying the Coase Theorem
Bass v. Gregory
• The basic question was whether the Jolly Angler had the right to a current of air.
• The court said yes, using the doctrine of lost grant. This is a different result than
in Bryant v. Lefever.
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Applying the Coase Theorem
Bass v. Gregory
• The basic question was whether the Jolly Angler had the right to a current of air.
• The court said yes, using the doctrine of lost grant. This is a different result than
in Bryant v. Lefever.
Doesn’t matter. All that is at issue is whether money changes hands.
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Applying the Coase Theorem
End
©2004 Charles W. Upton