If ________ bargaining to resolve an externality is to result in an efficient outcome, the initial assignment of rights must be clear to ________ parties.
A) public; only government-sponsored
B) public; at least one
C) private; at least one
D) private; both

Question

Quizplus · Accepted Answer

The statement refers to the Coase Theorem, which posits that if property rights are clearly defined and transaction costs are low, private bargaining will lead to an efficient outcome regardless of the initial allocation of rights. This requires that both parties involved in the negotiation understand their rights and responsibilities.

If ________ Bargaining to Resolve an Externality Is to Result