I have previously blogged about the dispute brewing at Wrigley Field, home of the Chicago Cubs. Several buildings across the street from the stadium have installed bleachers on the roof, and charge people to sit up there and watch the games. Wrigley Field exudes the rare positive externality,which the roof-owners are internalizing, for a profit. Though, this is not free-riding. Why? because the Cubs get 17% of the revenues, in exchange for keeping the view of the ballpark. Now, the rooftops make $20 million a year, after the Cubs take their percentage. This is the Coase Theorem in action! Contracting to internalize the costs of externalities.
So what’s the problem? Wrigley wants to renovate the stadium, which would entail installing new signage and a video scoreboard that would obstruct the view. And the Cubs can’t proceed unless the rooftop owners stipulate that they will not sue.