While the Coase theorem is appealing, private actors often fail to resolve the problems caused by external costs and benefits.

Question

Quizplus · Accepted Answer

Private actors may not be able to bargain efficiently, may have unequal bargaining power, may not be able to fully capture the costs or benefits of externalities, or may not have incentives to cooperate due to short-term gains or conflicting interests. This leads to market failures and the need for government intervention to internalize externalities.

While the Coase Theorem Is Appealing, Private Actors Often Fail