Question I A:Sound reduction,no soundproofing. B.Airline has the right to make sound,is not liable If no bargaining,airline makes sound,homeowners soundproof. If bargaining,homeowners could offer a million for sound reduction But probably won't because of their public good problem An example of an inefficient outcome from rational behavior C.Airline reduces sound with or without bargaining. Some seemed to think it could bargain to get the homeowners to pay part of it But why would they?If it makes sound,they are compensated. D.Now the public good problem disappears,so the answer changes in B ."Leveling the playing field"is a bad metaphor It is a serious mistake to think of everything as a zero sum game Sometimes what helps one party hurts the other But sometimes it benefits both parties by producing a more efficient outcome ·Consider case B With many home owners,the airline doesn'treduce noise With one firm,it is paid between $1,000,000 and $1,200,000 to reduce noise Which costs it only $1,000,000 So both sides are better off Question I • A: Sound reduction, no soundproofing. • B. Airline has the right to make sound, is not liable • If no bargaining, airline makes sound, homeowners soundproof. • If bargaining, homeowners could offer a million + for sound reduction • But probably won’t because of their public good problem • An example of an inefficient outcome from rational behavior • C. Airline reduces sound with or without bargaining. • Some seemed to think it could bargain to get the homeowners to pay part of it • But why would they? If it makes sound, they are compensated. • D. Now the public good problem disappears, so the answer changes in B • “Leveling the playing field” is a bad metaphor • It is a serious mistake to think of everything as a zero sum game • Sometimes what helps one party hurts the other • But sometimes it benefits both parties by producing a more efficient outcome • Consider case B • With many home owners, the airline doesn’t reduce noise • With one firm, it is paid between $1,000,000 and $1,200,000 to reduce noise • Which costs it only $1,000,000 • So both sides are better off