Transaction Costs and the Robustness of the Coase Theorem

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Transaction Costs and the Robustness of the Coase Theorem

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Luca Anderlini
Leonardo Felli

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Abstract

This paper explores the extent to which "ex ante" transaction costs may lead to failures of the Coase Theorem. In particular we identify the basic 'hold-up problem' that arises whenever the parties to a Coasian negotiation have to pay "ex ante costs" for the negotiation to take place. We then show that a 'Coasian solution' to this problem is not available: a Coasian solution typically entails a negotiation about the payment of the costs associated with the future negotiation, which in turn is associated with a fresh set of "ex ante" costs, and hence a new hold-up problem. Copyright 2006 Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 116 (2006)
Issue (Month): 508 (01)
Pages: 223-245
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Handle: RePEc:ecj:econjl:v:116:y:2006:i:508:p:223-245

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Paper
- Luca Anderlini & Leonardo Felli, 2001. "Transaction Costs and the Robustness of the Coase Theorem," STICERD - Theoretical Economics Paper Series 409, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
- Nabil Al-Najjar, Luca Anderlini & Leonardo Felli, . "Transaction Costs and the Robustness of the Coase Theorem," Working Papers gueconwpa~03-03-28, Georgetown University, Department of Economics. [Downloadable!]
- Luca Anderlini & Leonardo Felli, . "Transaction Costs and the Robustness of the Coase Theorem," Working Papers gueconwpa~03-03-27, Georgetown University, Department of Economics. [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Luca Anderlini & Leonardo Felli, 1998. "Costly Coasian Contracts," STICERD - Theoretical Economics Paper Series 362, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
Other versions:
- Luca Anderlini & Leonardo Felli, . ""Costly Coasian Contracts''," CARESS Working Papres 97-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences. [Downloadable!]
- Anderlini, L. & Felli, L., 1997. "Costly Coasian Contracts," Cambridge Working Papers in Economics 9704, Faculty of Economics, University of Cambridge.
- Luca Anderlini & Leonardo Felli, 1996. "Costly Coasian Contracts," Game Theory and Information 9610006, EconWPA, revised 14 Oct 1996. [Downloadable!]
- Luca Anderlini & Leonardo Felli, . "Costly Coasian Contracts," Penn CARESS Working Papers c5b2efc4326ca8bb8162440d6, Penn Economics Department. [Downloadable!]
Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
Other versions:
- Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
- Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June. [Downloadable!] (restricted)
Other versions:
- Dixit, Avinash & Olson, Mancur, 1997. "Does Voluntary Participation Undermine the Coase Theorem?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
Other versions:
- Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
Dilip Abreu & David Pearce & Ennio Stacchetti, 1989. "Renegotiation and Symmetry in Repeated Games," STICERD - Theoretical Economics Paper Series 198, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March. [Downloadable!] (restricted)
Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April. [Downloadable!] (restricted)
Benoit, Jean-Pierre & Krishna, Vijay, 1993. "Renegotiation in Finitely Repeated Games," Econometrica, Econometric Society, vol. 61(2), pages 303-23, March. [Downloadable!] (restricted)
Luca Anderlini & Leonardo Felli, 1996. "Costly Contingent Contracts," STICERD - Theoretical Economics Paper Series 313, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July. [Downloadable!] (restricted)
Other versions:
- Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Oliver Hart & John Moore, 1985. "Incomplete Contracts and Renegotiation," Working papers 367, Massachusetts Institute of Technology (MIT), Department of Economics.
Abrea Dilip & Pearce David & Stacchetti Ennio, 1993. "Renegotiation and Symmetry in Repeated Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 217-240, August. [Downloadable!] (restricted)
Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December. [Downloadable!] (restricted)
Other versions:
- Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Randall Akee, 2006. "Checkerboards and Coase: Transactions Costs and Efficiency in Land Markets," IZA Discussion Papers 2438, Institute for the Study of Labor (IZA). [Downloadable!]
Alex Anas & Richard Arnott, 2004. "Moving costs, security of tenure and eviction," Urban/Regional 0408005, EconWPA. [Downloadable!]
Zaman, Md Monowaruz, 2008. "An introduction to Economics of Information Biasing (EIB)," MPRA Paper 635, University Library of Munich, Germany, revised 15 Jun 2008. [Downloadable!]
Mishra, Ashok & Harris, J. Michael & Erickson, Kenneth & Hallahan, Charles, 2008. "What Drives Agricultural Profitability in the U.S.: Application of the DuPont Expansion Model," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6413, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
Zaman, Md Monowaruz, 2007. "The theoretical aspect of Muhammad Yunus’s dream-'putting poverty in museums'," MPRA Paper 1306, University Library of Munich, Germany, revised 28 Aug 2008. [Downloadable!]

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