3. I’ve to work late every Saturday night. So, I need to have a good sleep every Sunday morning. Peter

4. Sunday is our family day! We used to playing on the playground on every Sunday morning. Lee’s family

5. Suppose there’re only 5 hours in the morning, the transaction cost is 0….

7. Since the property right of a silent environment in the playground is not well-defined, so they don’t care about each other and the LEEs play all the 5 hours in the Sunday morning. Peter can’t stand with the noise of the LEEs… So, he writes a letter to the Lee’s family.

8. Dear Lee's family, I really can’t sleep on Sunday morning with the noise made by your children. I’m willing to pay you money for giving me silent morning on Sunday. Your neighbour, Peter

9. The Lee’s family also write a letter to Peter.

10. Dear Peter, We’re sorry. But we’re also willing to pay you money for letting us play on the playground on every Sunday morning. Your neighbour, Lee’s family

11. If the property right of a silent environment in the playground is given to Peter, he can sleep 5 hours in the Sunday morning. But his neighbour will try to negotiate with him by paying money to him as compensation, then … …

12. $ 20$ 0 5 th $ 30 $ 204 th $ 40$ 303 rd $ 50 2 nd $ 400$ 5001 st Maximum amount willing to pay for playing on the playground (Lee’s family) Marginal Private Benefit of sleeping (Peter) Hours MPB (min. amt. need to receive) of Peter to sleep in the 5 th hour : $0 Lee’s family’s max. amt. willing to pay for playing the 1 st hour on the playground : $400 Min. < Max.

13. $ 20$ 0 5 th $ 30 $ 204 th $ 40$ 303 rd $ 50 2 nd $ 400$ 5001 st Maximum amount willing to pay for playing on the playground (Lee’s family) Marginal Private Benefit of sleeping (Peter) Hours MPB (min. amt. need to receive) of Peter to sleep in the 4 th hour : $20 Lee’s family’s max. amt. willing to pay for playing the 2 nd hour on the playground : $50 Min.<Max.

14. $ 20$ 0 5 th $ 30 $ 204 th $ 40$ 303 rd $ 50 2 nd $ 400$ 5001 st Maximum amount willing to pay for playing on the playground (Lee’s family) Marginal Private Benefit of sleeping (Peter) Hours MPB (min. amt. need to receive) of Peter to sleep in the 3 rd hour : $30 Lee’s family’s max. amt. willing to pay for playing the 3 rd hour on the playground : $40 Min. < Max.

15. $ 20$ 0 5 th $ 30 $ 204 th $ 40$ 303 rd $ 50 2 nd $ 400$ 5001 st Maximum amount willing to pay for playing on the playground (Lee’s family) Marginal Private Benefit of sleeping (Peter) Hours MPB (min. amt. need to receive) of Peter to sleep in the 2 nd hour : $50 Lee’s family’s max. amt. willing to pay for playing the 4 th hour on the playground : $30 Max. < Min.

16. $ 20$ 0 5 th $ 30 $ 204 th $ 40$ 303 rd $ 50 2 nd $ 400$ 5001 st Maximum amount willing to pay for playing on the playground (Lee’s family) Marginal Private Benefit of sleeping (Peter) Hours MPB (min. amt. need to receive) of Peter to sleep in the 1 st hour : $500 Lee’s family’s max. amt. willing to pay for playing the 5 th hour on the playground : $20 Max. < Min.

17. When the property right of a silent environment in the playground is given to Peter, after negotiation, Peter will sleep 2 hours while the Lee’s family will play 3 hours on Sunday morning.

18. If the property right of a silent environment in the playground is given to the Lee’s family, they will play 5 hours in the Sunday morning. But Peter must negotiate with them by paying money to them as compensation. Then … …

19. $ 20$ 05 th $ 30$ 204 th $ 40 $ 30 3 rd $ 50 2 nd $ 400 $ 5001 st Marginal Private Benefit of playing on the playground (Lee’s family) Maximum amount willing to pay for sleeping (Peter) Hours MPB (min. amt. need to receive) of the Lee’s family for not playing in the playground in the 5 th hour : $20 Peter’s max. amt. willing to pay for sleeping in the 1 st hour : $500 Max.> Min.

20. $ 20$ 05 th $ 30$ 204 th $ 40 $ 30 3 rd $ 50 2 nd $ 400 $ 5001 st Marginal Private Benefit of playing on the playground (Lee’s family) Maximum amount willing to pay for sleeping (Peter) Hours MPB (min. amt. need to receive) of the Lee’s family for not playing in the playground in the 4 th hour : $30 Peter’s max. amt. willing to pay for sleeping in the 2 nd hour : $50 Max. > Min.

21. $ 20$ 05 th $ 30$ 204 th $ 40 $ 30 3 rd $ 50 2 nd $ 400 $ 5001 st Marginal Private Benefit of playing on the playground (Lee’s family) Maximum amount willing to pay for sleeping (Peter) Hours MPB (min. amt. need to receive) of the Lee’s family for not playing in the playground in the 3 rd hour : $40 Peter’s max. amt. willing to pay for sleeping in the 3 rd hour : $30 Min. > Max.

22. $ 20$ 05 th $ 30$ 204 th $ 40 $ 30 3 rd $ 50 2 nd $ 400 $ 5001 st Marginal Private Benefit of playing on the playground (Lee’s family) Maximum amount willing to pay for sleeping (Peter) Hours MPB (min. amt. need to receive) of the Lee’s family for not playing in the playground in the 2 nd hour : $50 Peter’s max. amt. willing to pay for sleeping in the 4 th hour : $20 Min. > Max.

23. $ 20$ 05 th $ 30$ 204 th $ 40 $ 30 3 rd $ 50 2 nd $ 400 $ 5001 st Marginal Private Benefit of playing on the playground (Lee’s family) Maximum amount willing to pay for sleeping (Peter) Hours MPB (min. amt. need to receive) of the Lee’s family for not playing in the playground in the 1 st hour : $400 Peter’s max. amt. willing to pay for sleeping in the 5 th hour : $0 Min. > Max.

24. When the property rights of the playground is given to the Lee’s family, The Lee’s family will play 3 hours while Peter will sleep 2 hours on Sunday morning.

25. Members list Isabella Choi ~ 3 Korie Law ~ 11 Anita Shum ~ 19