According to the Coase theorem, which of the following conditions must hold, in order for private solutions to externalities to be possible?
(i) bargaining costs are small
(ii) property ownership/rights cannot be defined
(iii) the number of parties involved is large
A)(i), (ii) and (iii)
B)conditions (i) and (ii) only
C)condition (i) only
D)conditions (i) and (iii) only

Question

Quizplus · Accepted Answer

The Coase theorem posits that if property rights are well-defined and transaction costs (including bargaining costs) are negligible, private parties can negotiate to solve the problem of externalities on their own, regardless of the initial allocation of rights. Therefore, condition (i) must hold, while conditions (ii) and (iii) are not necessary for the theorem's application.

According to the Coase Theorem, Which of the Following Conditions