Lecture 03
Coasean Bargaining
Dana Andersen
ECON 467
,Roadmap
1. Can we achieve the efficient outcome without government intervention?
2. What does the Coase theorem say?
3. What are the limits to Coasean bargaining?
,Coase Theorem
, Pigou vs Coase
We have argued that efficient allocations are not achieved in the presence
of externalities
Why?
There are no markets through which the source of the externality must
pay/be compensated for its effect on society
i.e. they're not priced
This means there's a role for government to create this market or price the
externality
Coasean Bargaining
Dana Andersen
ECON 467
,Roadmap
1. Can we achieve the efficient outcome without government intervention?
2. What does the Coase theorem say?
3. What are the limits to Coasean bargaining?
,Coase Theorem
, Pigou vs Coase
We have argued that efficient allocations are not achieved in the presence
of externalities
Why?
There are no markets through which the source of the externality must
pay/be compensated for its effect on society
i.e. they're not priced
This means there's a role for government to create this market or price the
externality
