Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?
A) Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off.
B) Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off.
C) Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat.
D) Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off.
Correct Answer:
Verified
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