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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)

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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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