Microeconomics · free preview
Coase and the Power of Property
When property rights are clear and bargaining is cheap, private negotiation internalizes the externality at the efficient quantity regardless of who holds the right, and when bargaining is expensive the theorem's promise fails.
1. The provocative claim
The provocative claim
2. The arithmetic both ways
The arithmetic both ways
3. Where the theorem breaks
Where the theorem breaks
4. The strategic residue
The strategic residue
5. The theorem's content
What does the Coase theorem actually claim?
6. Where it breaks
A city's air pollution harms 200,000 residents and flows from 50 factories. Why does private Coasean bargaining fail here?
7. The bargain's price
The refinery values its 72nd unit of output at 14 dollars while each unit causes 10 dollars of beekeeper damage. If the beekeeper holds the clean-air right, compute the minimum total payment per unit that makes the refinery prefer buying permission over skipping the unit, in dollars, and write the number.
8. What the theorem claims
What does the Coase theorem actually claim?
9. The million-party breakdown
Air pollution harms 200,000 residents and flows from 50 factories. Why does private bargaining fail here?
10. The surplus from stopping
The refinery's 90th unit of output is worth 9 dollars to it while causing 15 dollars of damage. Compute the social gain from not producing that unit, and write the number.
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