Coasian Bargaining
Coasian Bargaining refers to the economic theory proposed by Ronald Coase, suggesting that when individuals can negotiate freely and without cost, they can reach mutually beneficial agreements regarding property rights and resource allocation. This process is based on the idea that parties will negotiate to resolve conflicts or externalities (like pollution) in a way that maximizes overall welfare, regardless of the initial allocation of rights. Essentially, it highlights the importance of negotiation and cooperation in achieving efficient outcomes in situations where resources are limited or contested.
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Coasian bargaining refers to a concept in economics introduced by Ronald Coase. It suggests that when parties can negotiate without cost, they can resolve conflicts over resource use or externalities (like pollution) through direct agreements. For example, if a factory pollutes a river affecting nearby fishermen, they could negotiate a compensation deal that satisfies both sides. This approach emphasizes that if property rights are well-defined, parties will find mutually beneficial solutions, regardless of who holds those rights. In essence, it shows the power of negotiation in addressing issues caused by external factors in the economy.