Answer
According to the Coase theorem if the cost incurred by me when my room mate smokes is smaller than the benefit she gets from smoking then she would continue to smoke.
Yes this outcome is efficient.
We reach that solution by negotiation. She pays me for the costs I incurred and I let her smoke in the room.
Work Step by Step
According to the Coase theorem if the cost incurred by me when my room mate smokes is smaller than the benefit she gets from smoking then she would continue to smoke.
Yes this outcome is efficient.
We reach that solution by negotiation. She pays me for the costs I incurred and I let her smoke in the room.
