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The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what...

The Coase theorem suggests that efficient solutions to externalities can be determined through bargaining. Under what circumstances will private bargaining fail to produce a solution? Explain your answer.

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Answer #1

You one like is realy help me please...

Coarse theorem explains that socially efficient output can be obtain through bargaining if there should be an occurrence of externality.

For example, a polluting firm can give the affected party monetary compensation.

Anyway when transaction cost of externality is excessively high or the property rights are not well defined, at that point private bargaining will fail.

For example, a senior citizen of ill health affected by pollution will not accept any monetary compensation for his health. For him the value of health is a lot higher than the compensation given the polluting firm.

            If you have any doubt please comment..Thank you..

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