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Coase Competition and Compensation

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  • Hal Varian

    (University of Michigan, Dept of Economics)

Abstract

I show that the Pigovian solution to a simple externalities problem and a particular Coasian solution can be viewed as competitive equilibria from different initial endowments. I also describe the ``compensation mechanism,'' a mechanism that implements either the Coasian or Pigovian solution as the outcome of an economically natural bargaining game.

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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 9401002.

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Date of creation: 18 Jan 1994
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Handle: RePEc:wpa:wuwpmi:9401002

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  1. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-22, June.
  2. Schweizer,Urs, 1989. "Calculus of consent: A game-theoretic perspective," Discussion Paper Serie A 234, University of Bonn, Germany.
  3. Schmeidler, David & Vind, Karl, 1972. "Fair Net Trades," Econometrica, Econometric Society, vol. 40(4), pages 637-42, July.
  4. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
  5. E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers 333, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
  7. Groves, Theodore, 1979. "Efficient Collective Choice when Compensation is Possible," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 227-41, April.
  8. John Moore, 1991. "Implementation in Environments with Complete Information (Now published as 'Implementation, Contracts and Renegotiation in Environments with Complete Information' in J-J Laffont (ed.), Advances in Eco," STICERD - Theoretical Economics Paper Series /1991/235, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  10. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
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Cited by:
  1. Gregory Connor & Brian O’Kelly, 2012. "A Coasean Approach to Bank Resolution Policy in the Eurozone," FMG Special Papers sp214, Financial Markets Group.
  2. Lee, Sang-Ho, 1996. "An optional permit system for global pollution control," Economics Letters, Elsevier, vol. 50(1), pages 79-84, January.
  3. Azadeh Ahmadi & Mohammad Karamouz & Ali Moridi, 2010. "Robust Methods for Identifying Optimal Reservoir Operation Strategies Using Deterministic and Stochastic Formulations," Water Resources Management, Springer, vol. 24(11), pages 2527-2552, September.
  4. Murty, Sushama, 2006. "Externalities and Fundamental Nonconvexities : A Reconciliation of Approaches to General Equilibrium Externality Modelling and Implications for Decentralization," The Warwick Economics Research Paper Series (TWERPS) 756, University of Warwick, Department of Economics.

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