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Applications of the Coase Theorem

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  • Tatyana Deryugina
  • Frances Moore
  • Richard S. J. Tol

Abstract

The Coase Theorem has a central place in the theory of environmental economics and regulation. But its applicability for solving real-world externality problems remains debated. In this paper, we first place this seminal contribution in its historical context. We then survey the experimental literature that has tested the importance of the many, often tacit assumptions in the Coase Theorem in the laboratory. We discuss a selection of applications of the Coase Theorem to actual environmental problems, distinguishing between situations in which the polluter or the pollutee pays. While limited in scope, Coasian bargaining over externalities offers a pragmatic solution to problems that are difficult to solve in any other way.

Suggested Citation

  • Tatyana Deryugina & Frances Moore & Richard S. J. Tol, 2020. "Applications of the Coase Theorem," Papers 2004.04247, arXiv.org, revised Jan 2021.
    • Handle: RePEc:arx:papers:2004.04247
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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