Externalities, Non-Separability and the Coase Theorem: A Mathematical Re-Exposition

8 Pages Posted: 29 Jan 2009 Last revised: 24 Nov 2010

Date Written: January 29, 2009

Abstract

This note contributes to the Coase Theorem. The Coasian interaction between two producers is represented, according to a statement of Coase, as a straight problem of constrained maximization of the value of production. This formulation allows showing that the validity of the Coase's theorem for a two-by-two producers' economy does not depend on the form of cost function. This overcomes an unresolved controversy, fueled in a series of articles appeared in the AER in the 70's.

Keywords: Coase Theorem, Externalities

JEL Classification: B15, D23, D62

Suggested Citation

Chirichiello, Giuseppe, Externalities, Non-Separability and the Coase Theorem: A Mathematical Re-Exposition (January 29, 2009). Available at SSRN: https://ssrn.com/abstract=1334743 or http://dx.doi.org/10.2139/ssrn.1334743

Giuseppe Chirichiello (Contact Author)

University of Rome I ( email )

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+390649910462 (Phone)
+390649910648 (Fax)

HOME PAGE: http://sites.google.com/a/uniroma1.it/giuseppechirichiello/home

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