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The Coase Theorem and Coalitional Stability

Varouj A. Aivazian, Jeffrey L. Callen and Irwin Lipnowski
Economica
New Series, Vol. 54, No. 216 (Nov., 1987), pp. 517-520
DOI: 10.2307/2554185
Stable URL: http://www.jstor.org/stable/2554185
Page Count: 4
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The Coase Theorem and Coalitional Stability
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Abstract

It is the contention of this paper that the Coase theorem has yet to be formulated and proved in a rigorous manner. The problem addressed is that of strategic coalitional behaviour when more than two agents are involved in the externality. It is shown that there are examples for which non-efficient allocations are stable in the sense of Aumann-Maschler bargaining sets, thereby vitiating the Coase theorem. Hence a proper formulation of the Coase theorem must exclude bargaining set stability.

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