Advertisement

Economic Theory

, Volume 16, Issue 1, pp 1–22 | Cite as

A reconsideration of the problem of social cost: Free riders and monopolists

  • V.V. Chari
  • Larry E. Jones
Research Articles

Summary.

One version of the Coase Theorem is, If property rights are fully allocated, competition leads to efficient allocations. This version implies that the public goods problem can be solved by allocating property rights fully. We show that this mechanism is not likely to work well in economies with global externalities because the privatized economy is highly susceptible to strategic behavior: The free-rider problem manifests itself as a complementary monopoly problem in an associated private goods economy. Thus, our work relates the validity of the Coase Theorem to the literature on the incentives for strategic behavior in economies with complementarities.

Keywords and Phrases: Public goods, Externalities, Free-rider problem, Complementary monopoly. 
JEL Classification Numbers: D5, D6, H4. 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Springer-Verlag Berlin Heidelberg 2000

Authors and Affiliations

  • V.V. Chari
    • 1
  • Larry E. Jones
    • 1
  1. 1.Department of Economics, University of Minnesota, 1035 Heller Hall, Minneapolis, MN 55455, USAUS

Personalised recommendations