The Coase Theorem and the Core Revisited
Posted: 2 Jul 1998
Date Written: January 1996
This paper clarifies some of the issues raised by the original Aivazian-Callen-Coase debate concerning the Coase Theorem and the empty core. Despite the misconception by some legal scholars that Coase's limiting argument resolves the empty core issue, it is shown why economic scholars tend to disagree. Furthermore, contrary to Coase's conjecture that the empty core problem disappears in a world of transactions costs, it is shown that transactions costs exacerbate the problem of the empty core. Finally, this paper addresses the Mueller dual externality criticism of the Aivazian-Callen empty core example.
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