The capacity of side-payments to induce an efficient outcome, as predicted by the Coase theorem, is studied. Side-payments are formally introduced in a bimatrix game involving externalities and the resulting equilibrium is called.an induced equilibrium. When induced equilibria exist, they weakly Pareto-dominate a Nash equilibrium of the original game without side-payments. When, because of externalities, one market is missing, an induced equilibrium always exists, is uniquely valued, and is Pareto-efficient. When more than one market is missing, induced equilibria may not exist, may be Pareto-inefficient, and may be Pareto ranked. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.