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Coase Theorem

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PPGPortal > Home > Concept Dictionary > B, C > Coase Theorem

Coase Theorem 

Shows that under certain conditions, the efficient amount of an externality is independent of the distribution of property rights (endowments).

(Dwayne Benjamin, PPG 1002)


If consumers have quasi-linear preferences (no income effects), then the efficient level of an externality is independent (unique) of the original distribution of property rights.


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