a) With property rights assigned to the victim, what level of abatement can we expect before any bargaining occurs?

b) With property rights assigned to the victim, what level of abatement can we expect to prevail in this market after bargaining?

c) What is the maximum willingness to pay of the polluter to move from the level of pollution abatement in part (a) to the level of abatement in part (b)?

d) What is the minimum the victim would accept to move from the level of pollution abatement in part (a) to the level of abatement in part (b)?

e) What are the net benefits of bargaining for an efficient solution?

f) What level of abatement would you expect to happen if the property rights were initially given to the polluter instead? Explain your answer using the key finding of the Coase Theorem.

Assume for the graph below that there is ONE polluter and ONE victim of pollution, property rights are assigned to the victim, transactions are allowed and transaction costs are zero. $ Xo MB Z Y X W V X X T R 20 S X3 O Q P MA XMAX Abatement