________________ states that regardless of how property rights are assigned with an externality, the allocation of resources will be will be efficient when the parties can costlessly bargain with each other.
A)Bargaining power
B)Opportunity cost
C)The Coase Theorem
D)Common Property

Question

Quizplus · Accepted Answer

The Coase Theorem states that regardless of how property rights are assigned with an externality, the allocation of resources will be efficient when the parties can costlessly bargain with each other. This means that the outcome will be efficient as long as the parties are able to negotiate and come up with a mutually beneficial solution, regardless of who initially held the property rights. The Coase theorem states that if property rights are well-defined, if transaction costs are low and if parties are rational with full information, then the parties can always negotiate a mutually beneficial solution to an externality problem regardless of initial assignment of property rights. This means that efficient allocation of resources can be achieved through private bargaining without the need for government intervention.

________________ States That Regardless of How Property Rights Are Assigned