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The Coase Theorem and Coalitional Stability
Varouj A. Aivazian, Jeffrey L. Callen and Irwin Lipnowski
New Series, Vol. 54, No. 216 (Nov., 1987), pp. 517-520
Published by: Wiley on behalf of The London School of Economics and Political Science and The Suntory and Toyota International Centres for Economics and Related Disciplines
Stable URL: http://www.jstor.org/stable/2554185
Page Count: 4
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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.
Economica © 1987 London School of Economics