How Status Seeking May Prevent Coasean Bargaining
Forthcoming in Review of Law and Economics
27 Pages Posted: 3 Apr 2017
Date Written: February 20, 2017
Even in a world with zero transaction costs, status seeking can prevent efficient Coasean bargaining. Using simple illustrations and various examples, we show that ignoring this impediment can explain the failure of some negotiations where an efficient bargaining seems a priori reachable and expected. Rather than just emphasizing this neglected issue, we discuss various institutional and behavioral strategies by which this impediment can be overcome and even strategically used in socially desirable directions, such as bargaining over status.
Keywords: Bargain, Coase, Externalities, Market Failures, Positional Concerns, Status Seeking
JEL Classification: D62, D74, K10
Suggested Citation: Suggested Citation