Help with problem using Coase Theorm?!?

[caelin]

Please help me in any way you can with this problem, it is for review for a test I have tomorrow and I was sick with a kidney infection so I missed most of this chapter. Thanks!

Perform the following tasks as they apply to the Coase Theorem and the negotiations for use of a waterway.

Assume we have two groups which wish to use a waterway - local sports fishermen and farmers. The farmers wish to withdraw all of the water from the river for agricultural purposes, while the fishermen do not want to allow any water to be withdrawn

a. Why is it important to have no wealth effects (WTP = WTA) in order for Coase to work?


b. Assume that these two groups have equal financial resources. What impact are property rights going to have on the outcome? Explain. You may do this verbally and/or using a graph.


c. Now assume that these two groups do not have equal financial resources (the farmers have a lot more money than do the sports fishermen). What impact are property rights going to have on the outcome? Explain. You may do this verbally and/or using a graph, but is probably easier using a graph.