Let's say that two neighbors have a problem with one another. Johnson's dog (call him J-Dawg)...
Let's say that two neighbors have a problem with one another. Johnson's dog (call him J-Dawg) keeps "doing his business" in Smith's yard at a cost of $4,000 (PV) to Smith. Smith is upset and says so, but Johnson won't do anything to stop the mayhem. Smith consults an attorney who tells Smith that the court could either grant rights to Johnson to leave J-Dawg unfettered, or grant rights to Smith to have a dog-free yard. The problem could be fixed by Johnson if he simply bought a 540 leash and tether system to keep J- Dawg on his own yard. Smith could also fix the problem if he put a fence around his yard at a cost of $1,800. (Note: Smith would rather have a fence than have the dog problem continue.) Assume that costs are low when the neighbors bargain with one another. Assume that the parties divide any surpluses equally (using "fair" prices). A. Complete the following table to show the outcome when the court grants rights to Johnson to have 3-Dawg unfettered. Threat Value Cooperative Solution Cooperative Surplus Neighbor Johnson Smith Total Describe the cooperative solution including any payments made. B. Complete the following table to show the outcome when the court grants rights to Smith to have a dog-free yard: Cooperative Cooperative Neighbor Threat Value Solution Surplus Johnson Smith Total Describe the cooperative solution including any payments made.