Paper Works Inc. makes paper products and dumps its waste into the Fish River. The waste has harmed the productivity of the river's brown trout fishery, angering anglers that love to flyfish the...

Paper Works Inc. makes paper products and dumps its waste into the Fish River. The waste has harmed the productivity of the river's brown trout fishery, angering anglers that love to flyfish the river. Downstream from Paper Works Inc. is a fishing resort and guide service, Fish Ranch, who has experienced a significant decrease in profits due to waste dumped into the river by Paper Works. Inc. Suppose that Fish Ranch sues Paper Works Inc. on behalf of all anglers harmed by Paper Works Inc., and that the actual damages are $50 million each year. A. Suppose that the benefit to Paper Works Inc. of dumping the waste into the river is $75 million annually. Is it efficient for Paper Works Inc. to dump the waste into the river? How about if the benefit to Paper Works Inc. is $25 million? Explain. B. The court orders Paper Works Inc. to pay damages of $50 million so that all the anglers hurt by the pollution are compensated. a. What will Paper Works Inc. do if its benefit from dumping waste into the river is $75 million? Is this outcome efficient? b. How about if the benefit to Paper Works Inc. is $25 million? Is this outcome efficient? C. Is part B an application of the Normative Coase Theorem or the Normative Hobbes Theorem? Explain. D. What practical problem do courts run into when imposing damages in situations like this?

Sep 16, 2022

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Paper Works Inc. makes paper products and dumps its waste into the Fish River. The waste has harmed the productivity of the river's brown trout fishery, angering anglers that love to flyfish the...

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