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1. Use the logic from the flowchart above to explain why public nuisances tend to be protected by injunctions and private nuisances tend to be protected with liability rules. Pay attention to the nature of transactions costs, knowledge/information, and the ability to measure damages.

2. Copyrights protect both written works and musical recordings, and they exist in order to provide incentives for the creation of each. The strength of copyright protection in these areas is in many ways determined by the vigilance that goes into preventing and policing the unauthorized copying and distribution of copyrighted material.

Do you think that the creation of written works and musical recordings are equally dependent on the prevention of unauthorized copying and distribution? To put the question differently, does easy access to unauthorized digital copies of books weaken the incentives to write books to the same degree as easy access to unauthorized digital copies of music weakens the incentives to produce music? Carefully defend your position.

Are there transaction costs across the parties that would prevent post-trial bargaining No Yes Pick either property rule Do you know who values the right more? No Yes Do you have a good approximation of how much one party values the right? Protect the party who values it more with a property rule No Yes Base your judgment on the severity of the transaction costs and the degrees of imperfection in your knowledge Will the party whose value you don't know be able to organize for the purposes of making a liability payment? No Yes Base your judgment on the severity of the transaction costs and the degrees of imperfection in your knowledge Protect the party whose value you can estimate with a liability rule Are there transaction costs across the parties that would prevent post-trial bargaining No Yes Pick either property rule Do you know who values the right more? No Yes Do you have a good approximation of how much one party values the right? Protect the party who values it more with a property rule No Yes Base your judgment on the severity of the transaction costs and the degrees of imperfection in your knowledge Will the party whose value you don't know be able to organize for the purposes of making a liability payment? No Yes Base your judgment on the severity of the transaction costs and the degrees of imperfection in your knowledge Protect the party whose value you can estimate with a liability rule

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