Question
a) Suppose high regulation (-5, 2) and low regulation (10,-9) are the only options -maintaining the status quo (0,0) is not an option. Consumers want
a) Suppose high regulation (-5, 2) and low regulation (10,-9) are the only options -maintaining the status quo (0,0) is not an option. Consumers want more regulation, while manufacturers want less regulation. What is the bargaining rent? (Focus on the difference in how well off they are under each scenario.) What is the regulatory outcome? Who pays whom?
B) Suppose we assign property rights in the previous scenario. If firms had a right to less regulation or consumers had a right to more regulation, would this affect the bargaining rent, the regulatory outcome and who pays whom?
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