Encyclopedia of Law and Economics

Living Edition
| Editors: Alain Marciano, Giovanni Battista Ramello

Coase Theorem

Living reference work entry

Later version available View entry history

DOI: https://doi.org/10.1007/978-1-4614-7883-6_29-1

Definition

Assuming the property rights are well defined and that the costs of transacting are zero, parties to an externality will resolve the dispute efficiently, and the outcome will be unaffected by to which party rights are initially assigned.

Introduction

The Coase theorem was derived from the negotiation result laid out by Ronald Coase in his 1960 article, “The Problem of Social Cost” (1960), after having first been articulated in his discussion of the allocation of broadcast frequencies a year earlier (Coase 1959). The theorem, so named by George Stigler (1966, p. 113), has been stated in a variety of ways by the thousands of authors who have invoked it over the last five decades, but the essentials are as follows: Assuming the property rights are well defined and that the costs of transacting are zero, parties to an externality will resolve the dispute efficiently, and the outcome will be unaffected by to which party rights are initially assigned. In short, rights matter, but...

Keywords

Transaction Cost Negotiation Result Coase Theorem Perfect Competition Fictional World 
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References

  1. Allen DW (1990) What are transaction costs? Res Law Econ 14:1–18Google Scholar
  2. Coase RH (1959) The federal communications commission. J Law Econ 2(1):1–40CrossRefGoogle Scholar
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Further Reading

  1. Ayres I, Talley E (1995) Solomonic bargaining: dividing a legal entitlement to facilitate coasean trade. Yale Law J 104(5):1027–1117CrossRefGoogle Scholar
  2. Buchanan JM (1973) The Coase theorem and the theory of the state. Nat Resour J 13:579–594Google Scholar
  3. Calabresi G (1991) The pointlessness of pareto: carrying Coase further. Yale Law J 100:1211–1237CrossRefGoogle Scholar
  4. Calabresi G, Melamed AD (1972) Property rules, liability rules and inalienability: one view of the cathedral. Harv Law Rev 85(6):1089–1128CrossRefGoogle Scholar
  5. Coase RH (1988) Notes on the problem of social cost. In: The firm, the market, and the law. University of Chicago Press, Chicago, pp 157–185Google Scholar
  6. Cooter R (1982) The cost of Coase. J Leg Stud 11(1):1–33CrossRefGoogle Scholar
  7. Demsetz H (1972) When does the rule of liability matter? J Leg Stud 1(1):13–28CrossRefGoogle Scholar
  8. Ellickson RC (1986) Of Coase and cattle: dispute resolution among neighbors in Shasta County. Stanford Law Rev 38(3):623–687CrossRefGoogle Scholar
  9. Farber DA (1997) Parody lost/pragmatism regained: the ironic history of the Coase theorem. Va Law Rev 83:397CrossRefGoogle Scholar
  10. Halteman J (2005) Externalities and the Coase theorem: a diagrammatic presentation. J Econ Educ 36(4):385–390CrossRefGoogle Scholar
  11. Hoffman E, Spitzer ML (1982) The Coase theorem: some experimental tests. J Law Econ 25(1):73–98CrossRefGoogle Scholar
  12. Medema SG (1994) Ronald H Coase. Macmillan, LondonGoogle Scholar
  13. Medema SG (1999) Legal fiction: the place of the Coase theorem in law and economics. Econ Philos 15(2):209–233CrossRefGoogle Scholar
  14. Medema SG (2009) The hesitant hand: taming self-interest in the history of economic ideas. Princeton University Press, PrincetonGoogle Scholar
  15. Parisi F (2003) Political Coase theorem. Public Choice 115(1/2):1–36CrossRefGoogle Scholar
  16. Posner RA, Parisi F (2013) The Coase theorem, vol 2. Edward Elgar, CheltenhamGoogle Scholar
  17. Samuels WJ (1974) The Coase theorem and the study of law and economics. Nat Resour J 14:1–33Google Scholar
  18. Usher D (1998) The Coase theorem is tautological, incoherent or wrong. Econ Lett 61(1):3–11CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Colorado DenverDenverUSA