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| Author: | Dixit, A. Olson, M. |
| Title: | Does voluntary participation undermine the Coase Theorem? |
| Journal: | Journal of Public Economics
2000 : JUN, VOL. 76:3, p. 309-335 |
| Index terms: | Welfare economics Economic theory Equilibrium analysis Game theory Models |
| Freeterms: | Pareto optimum |
| Language: | eng |
| Abstract: | The Coase Theorem states that costless to enforcement of voluntary agreements yields efficient outcomes. It is argued that previous treatments fail to recognize the full meaning of voluntary. It requires a 2-stage game: non-cooperative participation decision, followed by a Coaseian bargaining only among those who choose to participate. This is illustrated in a simple public-goods model, and outcomes ranging from extremely inefficient to fully efficient are found. However, the efficient equilibrium is not robust to even very small transaction costs. Thus, doubt is cast on Coaseian claims of universal efficiency. Finally, a sort of coercion that restores efficiency is outlined. |
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