In order for private bargaining to result in the efficient outcome, A) an injunction must be requestedB) property rights must be clearly assigned to the parties involved in the dispute C) liability laws should not be present D) the right to impose an externality must be auctioned off to the highest bidder

Question

Arthur Payne

Business

9 December, 03:09

In order for private bargaining to result in the efficient outcome, A) an injunction must be requestedB) property rights must be clearly assigned to the parties involved in the dispute C) liability laws should not be present D) the right to impose an externality must be auctioned off to the highest bidder

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Answers (1)

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Monserrat Johnson · Answer 1

The correct answer is letter "B": property rights must be clearly assigned to the parties involved in the dispute.

Explanation:

Named after British lawyer and economist Ronald Coase (1910-2013) the Coase Theorem states when there are competitive markets and no transaction costs bargaining will lead to an efficient and mutually beneficial outcome. The theorem affirms that when property rights are defined and divided, parties will gravitate to the most efficient and beneficial outcome.