P* Price of a pollution right buys ≈10 rights from refiner Marginal market value of output 0 10 20 30 (start) (end) Paint maker — units of pollution MVpaint MV > price: gains from buying rights 30 20 10 0 (start) (end) Refiner — units of pollution (← increasing) MVrefiner MV < price: gains from selling rights 10 Coase invariance: the right ends up where it is worth most, whoever held it first — initial assignment changes only who ends up richer. Paint maker: 30 units, MV = 2.2. Refiner: 10 units, MV = 2.2. Both equal P* = 2.2. Trade stops when each firm's marginal output value equals the rights price —the fixed total of pollution now yields the most valuable output.