Farmer Owens has an apple orchard that must be pollinated by bees in order to bear fruit. Farmer Owens's neighbor, Maude, owns beehives with bees that can pollinate the apple trees. Suppose the benefit of the bees to Farmer Owens is $2 comma 000 per year. Suppose the bees provide no benefit to Maude but she must pay $5 comma 000 per year to maintain the hives. If Farmer Owens and Maude engage in Coase bargaining, what would likely result?

Question

Jeremiah Fleming

Social Studies

5 January, 20:26

Farmer Owens has an apple orchard that must be pollinated by bees in order to bear fruit. Farmer Owens's neighbor, Maude, owns beehives with bees that can pollinate the apple trees. Suppose the benefit of the bees to Farmer Owens is $2 comma 000 per year. Suppose the bees provide no benefit to Maude but she must pay $5 comma 000 per year to maintain the hives. If Farmer Owens and Maude engage in Coase bargaining, what would likely result?

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Colten Norman · Answer 1

The likely result would be Owen giving Maud 2000 Dollars for the bees requires to pollinate his farm and Maud accepting the 2000 Dollars as a benefit for the bees given out to Owen because the bees has no or was not intended for profit. So a little benefit to reduce cost of maintenance of the bee hive would bring a smile to Maud.

Explanation:

Since Maud has bee hives that are not of benefit to him and yet pays 5000 dollars yearly to maintain, he will at this time agree to give out 2000 dollars worth of benefit bees to Owen since that will automatically reduce his cost of maintenance of bee hive for that year.

Maud might then propose to Owen that after the bees have pollinated the farm and the apples are ripe, he will be given a reasonable percentage of the produce from the farm.

This way, it is a win-win scenario for both parties