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Coase Competition and Compensation

Author

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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.

Suggested Citation

  • Hal Varian, 1994. "Coase Competition and Compensation," Microeconomics 9401002, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:9401002
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    References listed on IDEAS

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    1. Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
    2. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    3. Theodore Groves, 1979. "Efficient Collective Choice when Compensation is Possible," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 227-241.
    4. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    5. repec:cep:stitep:/1991/235 is not listed on IDEAS
    6. L. Hurwicz, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 217-225.
    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    8. Schmeidler, David & Vind, Karl, 1972. "Fair Net Trades," Econometrica, Econometric Society, vol. 40(4), pages 637-642, July.
    9. Schweizer,Urs, 1989. "Calculus of consent: A game-theoretic perspective," Discussion Paper Serie A 234, University of Bonn, Germany.
    10. E. Maskin, 1983. "The Theory of Implementation in Nash Equilibrium: A Survey," Working papers 333, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Citations

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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. Murty, Sushama, 2010. "Externalities and fundamental nonconvexities: A reconciliation of approaches to general equilibrium externality modeling and implications for decentralization," Journal of Economic Theory, Elsevier, vol. 145(1), pages 331-353, 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: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(11), pages 2527-2552, September.
    4. Lee, Sang-Ho, 1996. "An optional permit system for global pollution control," Economics Letters, Elsevier, vol. 50(1), pages 79-84, January.

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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