In the case of Pendoley v. Ferreira (345 Mass. 309, 187 N.E.2d 142, 1963), a residential development encroached on an established a pig farm, causing residents to complain about the offensive smell. The residents sought an injunction to have the farm shut down.
(a) Suppose transaction costs between the residents and the farmer are low.
Does it matter for efficiency whether the court grants or denies the injunction? Explain.
(b) Now suppose transaction costs are high. What information does the court need to know to decide whether granting the injunction will lead to an ef- ficient outcome?
(c) Propose a remedy based on a liability rule. What information does the court need to know for your proposed remedy to achieve the efficient outcome?