I’ve to work late
every Saturday
night.
Peter
So, I need to have
a good sleep
every Sunday
morning.
Sunday is our
family day!
Lee’s family
We used to
playing on the
playground on
every Sunday
morning.
Suppose there’re only 5 hours in the morning ,
the transaction cost is 0….
Since the property right of a silent environment
in the playground is not well-defined, so they
don’t care about each other and the LEEs play
all the 5 hours in the Sunday morning.
Peter can’t stand with the noise of the LEEs…
So, he writes a letter
to the Lee’s family.
Dear Lee's family,
I really can’t sleep on
Sunday morning with the
noise made by your children.
I’m willing to pay you
money for giving me silent
morning on Sunday.
Your neighbour,
Peter
The Lee’s family also write a letter to Peter.
Dear Peter,
We’re sorry.
But we’re also willing to pay
you money for letting us play
on the playground on every
Sunday morning.
Your neighbour,
Lee’s family
If the property right of a silent environment in the
playground is given to Peter, he can sleep 5 hours in the
Sunday morning. But his neighbour will try to negotiate
with him by paying money to him as compensation,
then … …
Hours
1st
2nd
3rd
4th
5th
Marginal Private
Benefit of sleeping
(Peter)
Maximum amount
willing to pay for
playing on the
playground (Lee’s
family)
$ 500
$ 50
$ 30
$ 20
$ 400
$ 50
$ 40
$0
$ 30
$ 20
MPB (min. amt. need to receive) of Peter to sleep Min. < Max.
in the 5th hour : $0
Lee’s family’s max. amt. willing to pay for playing
the 1st hour on the playground : $400
Hours
1st
2nd
3rd
4th
5th
Marginal Private
Benefit of sleeping
(Peter)
Maximum amount
willing to pay for
playing on the
playground (Lee’s
family)
$ 500
$ 50
$ 30
$ 20
$ 400
$ 50
$ 40
$0
$ 30
$ 20
MPB (min. amt. need to receive) of Peter to sleep Min.<Max.
in the 4th hour : $20
Lee’s family’s max. amt. willing to pay for playing
the 2nd hour on the playground : $50
Hours
1st
2nd
3rd
4th
5th
Marginal Private
Benefit of sleeping
(Peter)
Maximum amount
willing to pay for
playing on the
playground (Lee’s
family)
$ 500
$ 50
$ 30
$ 20
$ 400
$ 50
$ 40
$0
$ 30
$ 20
MPB (min. amt. need to receive) of Peter to sleep Min. < Max.
in the 3rd hour : $30
Lee’s family’s max. amt. willing to pay for playing
the 3rd hour on the playground : $40
Hours
1st
2nd
3rd
4th
5th
Marginal Private
Benefit of sleeping
(Peter)
Maximum amount
willing to pay for
playing on the
playground (Lee’s
family)
$ 500
$ 50
$ 30
$ 20
$ 400
$ 50
$ 40
$0
$ 30
$ 20
MPB (min. amt. need to receive) of Peter to sleep Max. < Min.
in the 2nd hour : $50
Lee’s family’s max. amt. willing to pay for playing
the 4th hour on the playground : $30
Hours
1st
2nd
3rd
4th
5th
Marginal Private
Benefit of sleeping
(Peter)
Maximum amount
willing to pay for
playing on the
playground (Lee’s
family)
$ 500
$ 50
$ 30
$ 20
$ 400
$ 50
$ 40
$0
$ 30
$ 20
MPB (min. amt. need to receive) of Peter to sleep Max. < Min.
in the 1st hour : $500
Lee’s family’s max. amt. willing to pay for playing
the 5th hour on the playground : $20
When the property right of a silent environment
in the playground is given to Peter, after
negotiation,
Peter will sleep 2 hours while the Lee’s family
will play 3 hours on Sunday morning.
If the property right of a silent environment in the
playground is given to the Lee’s family, they will
play 5 hours in the Sunday morning. But Peter
must negotiate with them by paying money to
them as compensation. Then … …
Hours
Maximum amount
willing to pay for
sleeping (Peter)
Marginal Private
Benefit
of playing on the
playground (Lee’s
family)
1st
2nd
3rd
4th
5th
$ 500
$ 50
$ 30
$ 400
$ 50
$ 40
$ 30
$ 20
$ 20
$0
Peter’s max. amt. willing to pay for sleeping in the 1st hour : $500
Max.>
MPB (min. amt. need to receive) of the Lee’s family
Min.
th
for not playing in the playground in the 5 hour : $20
Hours
Maximum amount
willing to pay for
sleeping (Peter)
Marginal Private
Benefit
of playing on the
playground (Lee’s
family)
1st
2nd
3rd
4th
5th
$ 500
$ 50
$ 30
$ 400
$ 50
$ 40
$ 30
$ 20
$ 20
$0
Peter’s max. amt. willing to pay for sleeping in the 2nd hour : $50
MPB (min. amt. need to receive) of the Lee’s family
for not playing in the playground in the 4th hour : $30
Max. > Min.
Hours
Maximum amount
willing to pay for
sleeping (Peter)
Marginal Private
Benefit
of playing on the
playground (Lee’s
family)
1st
2nd
3rd
4th
5th
$ 500
$ 50
$ 30
$ 400
$ 50
$ 40
$ 30
$ 20
$ 20
$0
Peter’s max. amt. willing to pay for sleeping in the 3rd hour : $30
Min. >
MPB (min. amt. need to receive) of the Lee’s family
Max.
rd
for not playing in the playground in the 3 hour : $40
Hours
Maximum amount
willing to pay for
sleeping (Peter)
Marginal Private
Benefit
of playing on the
playground (Lee’s
family)
1st
2nd
3rd
4th
5th
$ 500
$ 50
$ 30
$ 400
$ 50
$ 40
$ 30
$ 20
$ 20
$0
Peter’s max. amt. willing to pay for sleeping in the 4th hour : $20
Min. >
MPB (min. amt. need to receive) of the Lee’s family
Max.
nd
for not playing in the playground in the 2 hour : $50
Hours
Maximum amount
willing to pay for
sleeping (Peter)
Marginal Private
Benefit
of playing on the
playground (Lee’s
family)
1st
2nd
3rd
4th
5th
$ 500
$ 50
$ 30
$ 400
$ 50
$ 40
$ 30
$ 20
$ 20
$0
Peter’s max. amt. willing to pay for sleeping in the 5th hour : $0
Min. >
MPB (min. amt. need to receive) of the Lee’s family for
Max.
st
not playing in the playground in the 1 hour : $400
When the property rights of the playground is given to the Lee’s family,
The Lee’s family will play 3 hours while Peter will sleep 2 hours on
Sunday morning.
Members list
Isabella Choi ~ 3
Korie Law ~ 11
Anita Shum ~ 19