Bargaining costs are generally high in cases involving environmental externalities because
A)there are strong incentives to be a free rider.
B)many individuals may be affected by the externalities.
C)it is difficult to measure the costs of the externalities.
D)all of the above.

Question

Quizplus · Accepted Answer

All of the given reasons contribute to the high bargaining costs in cases involving environmental externalities. The free rider problem arises because people can enjoy the benefits of environmental resources without bearing the full costs. The number of individuals affected by the externalities can be significant, leading to coordination difficulties and increasing transaction costs. Measuring the costs of environmental externalities is often complex since some of the costs may not have a market price or may not be directly observable, leading to information asymmetry and other challenges in the bargaining process.

Bargaining Costs Are Generally High in Cases Involving Environmental Externalities