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Coase Revisited: Economic Efficiency under Externalities, Transaction Costs and Non-Convexity

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  • Chavas, Jean-Paul

Abstract

This paper presents a general equilibrium analysis of economic efficiency under externalities, transaction costs and non-convexity. It applies to market exchange as well as contractual arrangements. We show that the Coase theorem continues to hold under general conditions: the efficient management of externalities remains consistent with aggregate profit maximization under transaction costs and non-convexity. We examine the role of transaction costs and explore how the minimization of transaction costs is an integral part of efficient allocations. We also show how our analysis applies under non-convex technology, provided that we allow for non-linear pricing in markets.

Suggested Citation

  • Chavas, Jean-Paul, 2013. "Coase Revisited: Economic Efficiency under Externalities, Transaction Costs and Non-Convexity," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149682, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:149682
    DOI: 10.22004/ag.econ.149682
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    Cited by:

    1. Jean-Paul Chavas & Eleonora Matteazzi & Martina Menon & Federico Perali, 2021. "Bargaining in the Family," CHILD Working Papers Series 88 JEL Classification: D1, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA.
    2. Aldo Montesano, 2018. "A Dual Characterization of Pareto Optimality," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 153-188, March.
    3. Jean-Paul Chavas & Eleonora Matteazzi & Martina Menon & Federico Perali, 2022. "(In)Efficient Bargaining in the Family," Working Papers 2, SITES.
    4. Chavas, Jean-Paul, 2017. "On food security and the economic valuation of food," Food Policy, Elsevier, vol. 69(C), pages 58-67.
    5. Aleksandar D. Slaev, 2023. "The Transaction Costs of Sustainability: Coase’s Proviso and the Roles of Environmentalists and the Government," Sustainability, MDPI, vol. 15(4), pages 1-18, February.

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    Keywords

    Institutional and Behavioral Economics; Political Economy; Public Economics;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics

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