The Political Coase Theorem: Experimental Evidence

54 Pages Posted: 7 Feb 2013 Last revised: 18 Mar 2014

See all articles by Sebastian Galiani

Sebastian Galiani

University of Maryland - Department of Economics

Gustavo Torrens

Indiana university

Maria Yanguas

University of San Andres (UMSA)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2014


The Political Coase Theorem (PCT) states that, in the absence of transaction costs, agents should agree to implement efficient policies regardless of the distribution of bargaining power among them. This paper uses a laboratory experiment to explore how commitment problems undermine the validity of the PCT. Overall, the results support theoretical predictions. In particular, commitment issues matter, and the existence of more commitment possibilities leads to better social outcomes, even when a redistribution of political power is required to take advantage of those possibilities. However, we also find that at low levels of commitment there is more cooperation than strictly predicted by our parameterized model while the opposite is true at high levels of commitment, and only large improvements in commitment opportunities have a signifi cant effect on the social surplus, while small changes do not.

Keywords: Political Coase Theorem, limited commitment, laboratory experiment

JEL Classification: C92, D72

Suggested Citation

Galiani, Sebastian and Torrens, Gustavo and Yanguas, Maria, The Political Coase Theorem: Experimental Evidence (February 2014). Available at SSRN: or

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Gustavo Torrens

Indiana university ( email )

Wylie Hall, 100 S Woodland Ave
Bloomington, IN 47405-7104
United States
8128568131 (Phone)
47405-7104 (Fax)

Maria Yanguas

University of San Andres (UMSA) ( email )

Vito Dumas 284
(1644) Victoria, Pcia
Buenos Aires, Buenos Aires 1644

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