The Coase theorem reconsidered: The role of alternative activities
The main statement put forth by Coase in his essay on the problem of social cost (Coase, 1960) is that given zero transactions costs, the assignment of entitlements to perform actions that cause negative externalities does not prevent the agents from reaching an efficient outcome through bargaining. Coase's argument decisively depends upon the agents having resources to bargain. Since rents, understood as the return to a certain activity in excess of its opportunity cost, are natural providers of such resources, they play a vital role in the logic of the Coase theorem. It has been recently argued (Halpin, 2007) not only that Coase provides an incomplete analysis of rents but also that he is committed to a flawed argument over rents by neglecting the role of alternative activities. This paper recasts Coase's argument in the presence of rents and alternative activities to show that the theorem can be vindicated.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
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.:
- W. Mark Crain & David Saurman & Robert D. Tollison, 1978. "The Coase Theorem and Quasi-Rents: Correcting the Record," Public Finance Review, SAGE Publishing, vol. 6(2), pages 259-262, April.
- Shapiro, David L., 1974. "A note on rent and the Coase theorem," Journal of Economic Theory, Elsevier, vol. 7(1), pages 125-128, January.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
- Usher, Dan, 1998. "The Coase theorem is tautological, incoherent or wrong," Economics Letters, Elsevier, vol. 61(1), pages 3-11, October.
- Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
- Halpin, Andrew, 2007. "Disproving The Coase Theorem?," Economics and Philosophy, Cambridge University Press, vol. 23(03), pages 321-341, November.
- Richard A. Tybout, 1972. "Pricing Pollution and Other Negative Externalities," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 252-266, Spring.
- Elizabeth Hoffman & Matthew Spitzer, 1981.
"The Coase Theorem: Some Experimental Tests,"
470, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Richard McKelvey & Talbot Page, 2000. "An Experimental Study of the Effect of Private Information in the Coase Theorem," Experimental Economics, Springer, vol. 3(3), pages 187-213, December.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:32:y:2012:i:1:p:129-134. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.