Question about coase theorem

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Reference no: EM1371709

Bob and Dexter share a dorm room. Bob is a chain smoker but Dexter does not smoke. There are no laws that forbid smoking in the dorm rooms. The benefit of smoking is worth $250 to Bob, but the smoke imposes a $500 cost on Dexter. How might the Coase theorem be used to achieve an efficient outcome in this situation? In your answer, be sure to define the Coase theorem, and the conditions under which the Coase theorem may work.

Reference no: EM1371709

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