Law of economics

Efficiency is when there is optimum benefit to both parties without failing one part.

The resulting payoffs in this game. D chooses a row, either row 1 or row 2, and simultaneously C chooses one of the columns1or 2. The strategy combination (row1; collumn1) has payoff 1000 for each D and payoff of 0 for C, and the combination (row2; column 2) gives D

payoff  of 400 and C payoff of 500. The combination (row1; collumn2) results in payoff 1000 for D and 250 for C, and when (row2; collumn1) is chosen, D gets 0 and C gets 500.

COLLUM 1 COLLUM 2 ROW 1                                         0

1000                                            250

1000                                           ROW2

500                                              0

500                                            400 Efficiency is not achieved if D has the right to operate his business since C will get no value. When D has aright to operate there will be 0 payoff for the if C decides to put noise proof wall the payoff of will be 250. If D decides to put the wall the payoff for C will be 500 and he will get a payoff 400 the first period.

The three scenarios do not give efficiency when D has entitlement to operate.

C is entitled to compensatory damages from D.

Efficiency is achieved if D has the right to operate and compensate C. When D has aright to operate there will be 500 payoffs for C payoff 750 for D.

C is entitled to an injunction against D.

In case of an injunction there will be no efficiency as the payoff for D will be 0 and that of C will be 500.