According to the Coase Theorem, when there is a conflict of property rights, the parties involved can bargain or negotiate terms that accurately reflect the full costs and underlying values of the property rights in question under ideal economic conditions, resulting in the most efficient outcome.
The Coase theorem: what is it?
Coase's Law. states that if one party has property rights, it is possible to negotiate an efficient level of output between the two parties and that the market can achieve an efficient outcome.
How significant is the Coase theorem?
However, the Coase theorem has been utilized by jurists and legal scholars to analyze and resolve legal disputes. It is regarded as an important foundation for the majority of contemporary economic analyses of government regulation, particularly in the case of externalities.
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