question archive The Coase Theorem states that: 1
The Coase Theorem states that: 1
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The Coase Theorem states that:
1. If bargaining is frictionless, then the initial assignment of property rights determines the market failures associated by externalities and voluntary agreements between private parties are useless,
2. If bargaining is difficult, then regardless of how property rights are assigned, voluntary agreements between parties will remedy the market failures associated with externalities and restore economic efficiency,
3. If bargaining is frictionless, market failures must be remedied by government intervention,
4. If bargaining is frictionless, then regardless of how property rights are assigned, voluntary agreements between private parties will remedy the market failures associated with externalities and restore economic efficiency.
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The Coase Theorem states that 4. If bargaining is frictionless, then regardless of how property rights are assigned, voluntary agreements between private parties will remedy the market failures associated with externalities and restore economic efficiency.
The Coase Theorem proposes a non-violent solution to market failures, which occur when the free market does not produce a satisfactory solution for the allocation of goods and services. For example, the market failure of noise pollution among families in a neighborhood may be settled peacefully by the Coase Theorem, if neighbors can agree to a "quiet time" each evening. The other condition of the Coase Theorem is that the solution must come without any substantial negotiation costs.
