Coase Revisited: Economic Efficiency under Externalities, Transaction Costs and Non-Convexity

This paper presents a general equilibrium analysis of economic efficiency under externalities, transaction costs and non-convexity. It applies to market exchange as well as contractual arrangements. We show that the Coase theorem continues to hold under general conditions: the efficient management of externalities remains consistent with aggregate profit maximization under transaction costs and non-convexity. We examine the role of transaction costs and explore how the minimization of transaction costs is an integral part of efficient allocations. We also show how our analysis applies under non-convex technology, provided that we allow for non-linear pricing in markets.


Issue Date:
2013
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/149682
Total Pages:
13
JEL Codes:
B4; D5; D6
Series Statement:
Poster




 Record created 2017-04-01, last modified 2017-08-27

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