Assume that A values his house at $90,000. B is willing to pay $110,000 for A’s house in order to relocate closer to work. After signing a contract, B’s employer announces that the company will move to another city. In view of this fact, the value of the house to B is reduced to $75,000. From an efficiency viewpoint, who should own the house, A or B? How will the parties achieve efficiency in allocating the house if the court enforces the contract?
Assume that A values his house at $90,000. B is willing to pay $110,000 for A’s house in order to relocate closer to work. After signing a contract, B’s employer announces that the company will move to another city. In view of this fact, the value of the house to B is reduced to $75,000. From an efficiency viewpoint, who should own the house, A or B? How will the parties achieve efficiency in allocating the house if the court enforces the contract?
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 54P
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Question
Assume that A values his house at $90,000. B is willing to pay $110,000 for A’s house in order to
relocate closer to work. After signing a contract, B’s employer announces that the company will move
to another city. In view of this fact, the value of the house to B is reduced to $75,000. From an
efficiency viewpoint, who should own the house, A or B?
How will the parties achieve efficiency in allocating the house if the court enforces the contract?
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