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Coasean bargaining in the presence of Pigouvian taxation

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  • MacKenzie, Ian A.
  • Ohndorf, Markus

Abstract

Coasean arguments against the Pigouvian perspective are well established. A central tenet in this criticism argues that a Pigouvian tax may be a source of inefficiency: if parties were to bargain in the presence of a Pigouvian tax, (allocative) inefficiencies would occur—the so-called Buchanan–Stubblebine–Turvey Theorem. By analyzing a Coasean environment where the appropriation of property rights is costly, we show Coasean bargaining in the presence of a pre-existing (Pigouvian) tax may be superior. This has implications for policy where dual regulatory environments exist, such as regulation at the state and federal level, as well as environmental liability and litigation.

Suggested Citation

  • MacKenzie, Ian A. & Ohndorf, Markus, 2016. "Coasean bargaining in the presence of Pigouvian taxation," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 1-11.
    • Handle: RePEc:eee:jeeman:v:75:y:2016:i:c:p:1-11
    DOI: 10.1016/j.jeem.2015.09.003
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    Cited by:

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    2. Matsushima, Noriaki & Shinohara, Ryusuke, 2019. "Pre-negotiation commitment and internalization in public good provision through bilateral negotiations," Journal of Public Economics, Elsevier, vol. 175(C), pages 84-93.
    3. Ryusuke Shinohara, 2021. "Interregional negotiations and strategic delegation under government subsidy schemes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 551-582, June.
    4. Heyen, Daniel & Weinschenk, Philipp, 2023. "Can they sort it out themselves? Regulating externalities between Coase and Pigou," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277647, Verein für Socialpolitik / German Economic Association.
    5. Friesen, Lana & MacKenzie, Ian A. & Nguyen, Mai Phuong, 2023. "Initially contestable property rights and Coase: Evidence from the lab," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).

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    More about this item

    Keywords

    Coasean bargaining; Pigouvian taxation;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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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