Suppose That a Smoker and a Non-Smoker Are Seated Next

Multiple Choice

Suppose that a smoker and a non-smoker are seated next to each other in a restaurant. This restaurant does not offer a non-smoking section. The smoker is indifferent between 1) smoking and 2) not smoking and consuming a $6 dessert. The non-smoker values being able to eat in a smoke-free environment at $10. According to the Coase Theorem, and assuming no bargaining costs, what will happen?

A) The smoker will continue to smoke because that is his right.
B) The smoker will stop smoking, just to be a nice guy.
C) The non-smoker will offer to pay the smoker between $6 and $10 to stop smoking, but the smoker will refuse because he has the right to smoke.
D) The non-smoker will offer to pay the smoker between $6 and $10 to stop smoking, and the smoker will accept the money and refrain from smoking.