Question
Asked Dec 6, 2019
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Does the number of bands playing on a Saturday night depend on how many
tenants there are in the building? (Assume that the costs described in the table above
refer to the total costs to tenants, not the cost to each tenant.)
A. Maybe, due to possible transaction costs
B. No, since they see the owner often and it is easy to negotiate
C. Yes because it makes an agreement harder to enforce
D. No, due to the free‐rider theory

1 band
No bands
2 bands
3 bands
200
Bar owner
100
300
benefits
125
Tenants costs
75
400
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1 band No bands 2 bands 3 bands 200 Bar owner 100 300 benefits 125 Tenants costs 75 400

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The number of tenants in the building will impact the number of bands played on Saturday. The reason behind the same is that as the number increases, it gets difficult to enforce the agreement as the cost of the loud music on one tenant might be different from the co...

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