Question

Suppose that a surfboard designer owns a building and is renting part of the building's space to a doctor. Further suppose that because the surfboard designer is the owner, he has the right to make noise during the day while he sands the boards. While the doctor cannot insist on a quiet environment, the doctor could move to a quieter building. However, rent in the next best building is $350/month more than rent in the noisy building. The surfboard designer can adopt a new technology that eliminates the noise for $275/month. Given this situation, can the doctor find a private solution with the surfboard designer that will make both better off?

Answer 1

Answer:

Yes, if doctor pays at least $275 to designer, there will be no noise and designer will be able to produce without increases costs.

Explanation:

The surfboard designer makes a lot of noise.Doctor on the other hand needs peace to function. The doctor an shift to another building but rent is $350 more.

The surfboard designer can reduce noise through new technology but it costs $275.

Assuming that there is no cost involved in negotiations, both parties can be better off if the doctor pays at least $275 to designer to adopt new technology. The maximum amount the designer will be willing to give will be $350.