Coase Competition and Compensation
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.
References listed on IDEAS
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- 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.
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- Walker, Mark, 1981. "A Simple Incentive Compatible Scheme for Attaining Lindahl Allocations," Econometrica, Econometric Society, vol. 49(1), pages 65-71, January.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
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