In markets with externalities, if property rights are assigned unambiguously and if the parties involved can negotiate costlessly, then the ________ theorem suggests that the parties will arrive at a Pareto-optimal outcome regardless of which one owns the property rights.
A) Coase
B) Dolan
C) Pigou

Question

Quizplus · Accepted Answer

The Coase theorem posits that if property rights are clearly defined and transaction costs are negligible, parties will negotiate to correct externalities and reach an efficient outcome, regardless of who initially holds the rights.

In Markets with Externalities, If Property Rights Are Assigned Unambiguously