4.11 Anil, a college student, loves to throw parties over the weekends, where he invites his friends and listens to loud music until 2AM in the morning. Sunil lives with his wife Neera in the upstairs apartment directly above Anil. This weekend, Neera is recovering from a surgery and would like to have some peace and quiet.

Sunil is considering whether he should offer to pay Anil to not throw a party this weekend. Anil values the enjoyment of his party at 2,000 (Indian rupees).

a. Sunil and Neera value their peace and quiet at 5,000. Can Anil and Sunil reach a mutually agreeable price for Anil to cancel the party?

a. If Sunil and Neera value quiet at 1,000 instead, can Anil and Sunil reach a mutually agreeable price for Anil to cancel the party?

b. Assuming efficient bargaining, for what range of Sunil’s valuation of quiet will Anil cancel the party?