The Coase solution to the externality problem only works when bargaining costs are high.

Question

Quizplus · Accepted Answer

The Coase solution to the externality problem works when property rights are clearly defined, transaction costs are low, and parties can bargain without any impediments. In fact, Coase argued that in the absence of transaction costs, the outcome of the bargaining process would be independent of the initial assignment of property rights. However, if bargaining costs are high, then reaching a Coasean solution may not be feasible.

The Coase Solution to the Externality Problem Only Works When