Please need help, don't know where to start on this question

4. Coase Farm grows soybeans on farmland next to property owned by Taggart Transcontinental Railroad. Taggart can operate zero. one. or two trains per day by Coase Farm. yielding an annual net income of zero, $9 million. or $ 12 million. Coase Farm can grow soybeans on zero. one or two elds. yielding an annual net income of zero. $15 million. or $18 million less environmental damages inflicted by Taggart's trains of $4 million per train. per eld planted. per year. The annual incomes of Taggart and C oase. respectively. as a function of the number of trains that Taggart operates and the number of elds that Coase uses to your soybeans, are shown below. For example. if Taggart runs one train and Coase plants two elds. Taggart earns income of $9 million. whereas Coase generates $18 million less $4 million of damages to each eld, for a net income of S 10 million. (so. 30) ($0. $15) ($0. $18) 39, so $9. $11 $9. $10 $12, $0 $12, $7 $12. $2 Annual income for (Taggart. Coase) Taggart Transcontinental carmot be held liable for the damages it causes to Coase Farm. It is prohibitively expensive for Taggart Transcontinental and Coase Farm to enter into a contract regarding either party's use of its land. a. What operating decisions will Taggart and Coase make if each maximizes its own prots. assuming that each understands the other's payoffs? b. Suppose that Taggart Transcontinental and Coase Farm merge. What operating decisions maximize the prots of the merged rm? How does the income of each division compare to each rm's income before the merger? c. You are the CEO of the merged rm. You are contemplating how to allocate decision rights and measure performance after the merger. Possibilities include. but are not limited to (i) decentralize operating decision rights (T T chooses how many trains to run and CF chooses how many elds to use) and evaluate divisions on divisional income; (ii) decentralize operating decision rights and evaluate on the basis of divisional income. but charge IT for the damages it causes CF, transferring the money to CF; (iii) decentralize operating decision rights but evaluate everyone on the basis of rmwide income; (iv) centralize operating decision rights and evaluate divisions relative to a prot budget that reects the operating decisions you intend to make. What should you do