Despite the appealing logic of the Coase theorem, private actors often fail to resolve on their own the problems caused by externalities.

Question

Stephanie Gieske · Accepted Answer

Final Answer : True, Explanation :  The Coase theorem suggests that if property rights are clearly defined and transaction costs are low, private parties can negotiate solutions to the problem of externalities on their own. However, in reality, high transaction costs, information asymmetry, and public goods characteristics often prevent private actors from successfully resolving externalities without government intervention.

Despite the appealing logic of the Coase theorem, private actors often fail to resolve on their own the problems caused by externalities.

Definitions

Learning Objectives

Learning Objectives

Related questions