Coase TheoremSlides [link]
- Read KO pp 139 - 143
- Read New York Times article “Town Utility Buys Town It Choked, Lock, Stock and Blue Plume”
- Watch this MRU video on the Coase Theorem
- Was this utility transaction a “good” thing?
- Why don’t we see more externalities being resolved with transactions like this? Your response should reference the assumptions of the Coase Theorem, as discussed in the KO reading.
- Ronald Coase’s original article on this topic is one of the most cited papers in economics.
- Another, longer, article on the Gavin Power Plant transaction, “For $20 Million, a Coal Utility Bought an Ohio Town and a Clear Conscience,” from the Atlantic
- Coase provided a seminal challenge to the idea that externalities necessarily imply markets won't work.
- In the end, ended up illuminating more clearly the critical role of property rights and transaction costs in markets.
- Know how to find a Coasean equilibrium under these assumptions.