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How to negotiate with Coase?

Author

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  • Jean-Christophe PEREAU (GREThA, UMR CNRS 5113)
  • Sébastien ROUILLON (GREThA, UMR CNRS 5113)

Abstract

This article analyses the bargaining side of the Coase theorem in a 3-player strategic framework. We consider several bilateral bargaining protocols between two firms polluting one household (the victim). Our results show that when property rights are given to the victim, he prefers to bargain separetely and simultaneously with the two firms. However when property rights are given to the firms, they prefer to bargain sequentially with the household. This last configuration yields a non optimal outcome and invalidates the bargaining Coase theorem.

Suggested Citation

  • Jean-Christophe PEREAU (GREThA, UMR CNRS 5113) & Sébastien ROUILLON (GREThA, UMR CNRS 5113), 2011. "How to negotiate with Coase?," Cahiers du GREThA 2011-02, Groupe de Recherche en Economie Théorique et Appliquée.
  • Handle: RePEc:grt:wpegrt:2011-02
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    File URL: http://cahiersdugretha.u-bordeaux4.fr/2011/2011-02.pdf
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    Keywords

    Coase theorem; delegation; non cooperative bargaining; property rights; sequential negotiation; simultaneous negotiation;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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