Project delivery priority decision : PO or Client ?

What do the Development Team think would better help them to meet the Sprint Goal? A, B, or perhaps some other work entirely?

The role of the Product Owner is accountable for maximizing the value of the work done by the Development Team, but the Scrum Guide does not specify the methods or approaches to do this. Usually, this means considering all of the stakeholders in a product or service.

As a Product Owner, you probably have a rationale for why B is more valuable than A. Perhaps it is something of interest to potential clients. Perhaps it's a strategic value to the organization to provide B sooner. Regardless, I would strongly advise an organization to not let a single client dictate product strategy, though. As a member of the developing organization, you have insight into the longer term product vision and can prioritize among all of the stakeholders.

+1 Ian, Thomas

We're in the middle of sprint, and we see that we have the capacity to finish either Story A or Story B

Keep in mind that you are taking inventory (unfinished product) and returning it to the product backlog.   My advice is to ensure that the Scrum Team discusses this in the next Retrospective.   Did they underestimate the effort?   Were there unknowns that became known once the work began?

Help the team navigate the reasons why they needed to de-scope from their original forecast, and come up with strategies/experiments to try and mitigate future occurrences.

The role of the Product Owner is accountable for maximizing the value of the work done by the Development Team, but the Scrum Guide does not specify the methods or approaches to do this. Usually, this means considering all of the stakeholders in a product or service.

Very well put.

To build on this… who is the Product Owner accountable to?

For simplicity, let's assume the Product Owner is solely accountable to the customer: is the Product Owner prepared to exercise his or her own judgement, against the expressed wish of the customer? This would be an entirely reasonable approach, and it may require courage (one of the Scrum Values), but like any prioritization decision, it will be subject to inspection.

The effectiveness of such decisions is likely to affect whether the Product Owner stays in his or her role, and could potentially determine the long term viability of the product.

Ultimately, if the Product Owner is not allowed to make this call, maybe they aren't really the owner of the product after all.