Near an ocean beach, a high-rise building is being constructed that will block the scenic view of the ocean by the residents of a low-rise building. The Coase theorem suggests that this type of dispute between the owners of high-rise and low-rise buildings:
A) Can be resolved by the owners themselves through individual bargaining
B) Has to be resolved by city government officials
C) Can only be resolved by a zoning ordinance restricting high-rise buildings
D) Should be resolved by a government fine for the builder of the high-rise

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate a mutually agreeable solution to a dispute without the intervention of government. In this case, the owners of the high-rise and low-rise buildings can negotiate a compensation or arrangement that allows the low-rise building residents to maintain their view of the ocean.

Near an Ocean Beach, a High-Rise Building Is Being Constructed