The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Coase Theorem

  • Francesco Parisi
Reference work entry


The Coase Theorem holds that, regardless of the initial allocation of property rights and choice of remedial protection, the market will determine ultimate allocations of legal entitlements, based on their relative value to different parties. Coase’s assertion has occasioned intense debate. This article provides an intellectual history of Coase’s fundamental theorem and surveys the legal and economic literature that has developed around it. It appraises the most notable attacks to the Coase Theorem, and examines its methodological implications and normative and practical significance in legal and policy settings.


Adverse selection American Law and Economics Association Asymmetric information Bargaining Coase theorem Contract enforcement Efficient allocation Entropy Externalities Free rider problem Hold-up Inalienability Incentives Income effect Law, economic analysis of Liability rules Pigou, A. C. Pigouvian taxes Plant, A. Private information Property fragmentation Property rights Public goods Scarcity Social cost Stigler, G. Strategic behaviour Tort Transaction costs Voluntary transfers 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Ayres, I., and E. Talley. 1995. Solomonic bargaining: Dividing a legal entitlement to facilitate Coasean trade. The Yale Law Journal 104: 1027–1117.CrossRefGoogle Scholar
  2. Buchanan, J., and Y.J. Yoon. 2000. Symmetric tragedies: Commons and anticommons property. Journal of Law and Economics 29: 1–13.CrossRefGoogle Scholar
  3. Calabresi, G. 1965. The decision for accidents: An approach to non-fault allocation of costs. Harvard Law Review 78: 713–745.CrossRefGoogle Scholar
  4. Calabresi, G. 1968. Transaction costs, resource allocation and liability rules: A comment. Journal of Law and Economics 11: 67–68.CrossRefGoogle Scholar
  5. Calabresi, G., and A.D. Melamed. 1972. Property rules, liability rules, and inalienability: One view of the cathedral. Harvard Law Review 85: 1089–1128.CrossRefGoogle Scholar
  6. Cheung, S. 1970. The structure of a contract and the theory of a non-exclusive resource. Journal of Law and Economics 13: 49–70.CrossRefGoogle Scholar
  7. Coase, R.H. 1959. The Federal Communications Commission. Journal of Law and Economics 2: 1–40.CrossRefGoogle Scholar
  8. Coase, R.H. 1960. The problem of social cost. Journal of Law and Economics 3: 1–44.CrossRefGoogle Scholar
  9. Coase, R.H. 1988. The firm, the market, and the law. Chicago: University of Chicago Press.Google Scholar
  10. Coase, R.H. 1992. The institutional structure of production. American Economic Review 82: 713–719.Google Scholar
  11. Coase, R.H. 1993. Law and economics at Chicago. Journal of Law and Economics 36: 239–254.CrossRefGoogle Scholar
  12. Cooter, R. 1987. Coase theorem. In The new Palgrave: A dictionary of economics, ed. J. Eatwell, M. Milgate, and P. Newman, vol. 1. London: Macmillan.Google Scholar
  13. Cornes, R., and T. Sandler. 1986. The theory of externalities, public goods, and club goods. Cambridge: Cambridge University Press.Google Scholar
  14. Demsetz, H.M. 1967. Toward a theory of property rights. American Economic Review 57: 347–359.Google Scholar
  15. Demsetz, H.M. 1972. When does the rule of liability matter? The Journal of Legal Studies 1: 13–28.CrossRefGoogle Scholar
  16. Epstein, R.A. 1993. Holdouts, externalities, and the single owner: One more salute to Ronald Coase. Journal of Law and Economics 36: 553–586.CrossRefGoogle Scholar
  17. Heller, M.A. 1998. The tragedy of the anticommons: Property in the transition from Marx to markets. Harvard Law Review 111: 621–688.CrossRefGoogle Scholar
  18. Kahneman, D., J.L. Knetsch, and R.H. Thaler. 1990. Experimental tests of the endowment effect and the Coase theorem. Journal of Political Economy 98: 1325–1348.CrossRefGoogle Scholar
  19. Kaplow, L., and S. Shavell. 1996. Property rules versus liability rules: An economic analysis. Harvard Law Review 109: 723–754.CrossRefGoogle Scholar
  20. Kuhn, T.S. 1970. The structure of scientific revolutions. 2nd ed. Chicago: University of Chicago Press.Google Scholar
  21. Manne, H.G. 1975. The economics of legal relationships. St. Paul: West Publishing Co.Google Scholar
  22. Manne, H.G. 1993. The intellectual history of George Mason University School of Law. Arlington: School of Law, George Mason University.Google Scholar
  23. Nutter, G.W. 1968. The Coase theorem on social cost: A footnote. Journal of Law and Economics 16: 503–507.CrossRefGoogle Scholar
  24. Parisi, F. 1995. Private property and social costs. European Journal of Law and Economics 2: 149–173.CrossRefGoogle Scholar
  25. Parisi, F. 2002. Entropy in property. American Journal of Comparative Law 50: 595–632.CrossRefGoogle Scholar
  26. Parisi, F. 2006. Entropy and the asymmetric Coase theorem. In Property rights dynamics: A law and economics perspective, ed. D. Porrini and G. Ramello. London: Routledge.Google Scholar
  27. Pigou, A.C. 1920. The economics of welfare. London: Macmillan.Google Scholar
  28. Plant, A. 1974. Selected economic essays and addresses. London: Routledge and Kegan Paul.Google Scholar
  29. Polinsky, A.M. 1989. An introduction to law and economics. Boston: Little, Brown and Company.Google Scholar
  30. Regan, D.H. 1972. The problem of social cost revisited. Journal of Law and Economics 15: 427–433.CrossRefGoogle Scholar
  31. Salter, J.A. 1921. Allied shipping control. Oxford: Clarendon Press.Google Scholar
  32. Schulz, N., F. Parisi, and B. Depoorter. 2002. Fragmentation in property: Towards a general model. Journal of Institutional and Theoretical Economics 158: 594613.CrossRefGoogle Scholar
  33. Shapiro, F.R. 1985. The most cited law review articles. California Law Review 73: 1540–1554.CrossRefGoogle Scholar
  34. Stigler, G.J. 1966. The theory of price. 3rd ed. New York: Macmillan.Google Scholar
  35. Stigler, G.J. 1988. Memoirs of an unregulated economist. New York: Basic Books.Google Scholar
  36. Wellisz, S. 1964. On external diseconomies and the government assisted invisible hand. Economica 31: 345–362.CrossRefGoogle Scholar
  37. Williamson, W., and S.G. Winter. 1991. The nature of the firm: Origins, evolution, and development. New York: Oxford University Press.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Francesco Parisi
    • 1
  1. 1.