Transaction costs and the robustness of the Coase Theorem

Anderlini, Luca and Felli, Leonardo (2000) Transaction costs and the robustness of the Coase Theorem. TE/01/409. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Abstract

This paper explores the extent to which the presence of ex-ante transaction costs may lead to failures of the Coase Theorem. In particular we identify and investigate the basic ‘hold-up problem’ which arises whenever the parties to a Coasian negotiation have to pay some ex-ante costs for the negotiation to take place. We then show that a ‘Coasian solution’ to this hold-up problem is not available. This is because a Coasian solution to the hold-up problem typically entails a negotation about the payment of the costs associated with the future negotiation which in turn is associated with a fresh set of ex-ante costs, and hence with a new hold-up problem.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://sticerd.lse.ac.uk/
Additional Information:	© 2000 Luca Anderlinie and Leonardo Felli.
Library of Congress subject classification:	H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System:	D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights D - Microeconomics > D6 - Welfare Economics > D60 - General
Sets:	Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) Departments > Economics Collections > LSE Financial Markets Group (FMG) Working Papers
Identification Number:	TE/01/409
Date Deposited:	28 Feb 2008
URL:	http://eprints.lse.ac.uk/3591/

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