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The generalized Coase Theorem and separable individual preferences: an extension

Authors
Journal
European Journal of Political Economy
0176-2680
Publisher
Elsevier
Publication Date
Volume
15
Issue
2
Identifiers
DOI: 10.1016/s0176-2680(99)00009-9
Keywords
  • Coase Theorem
  • Rights
  • Individual Preference Ordering
Disciplines
  • Political Science

Abstract

Abstract In a recent article [Bernholz, P., 1997. Property rights, contracts, cyclical social preferences, and the Coase Theorem: A synthesis. European Journal of Political Economy, 13, 419–442] it was shown that the Coase Theorem can be generalized to all cases of assignments of rights, including political and bureaucratic rights. At the same time, however, additional assumptions besides the absence of transaction costs had to be introduced to assure the validity even of the original Coase Theorem limited to market phenomena. The assumptions are that external and internal contracts must be binding, that a finely divisible good like money must be present and be valued by all, and that individual preference orderings are separable. In the present extension this latter rather restrictive assumption will be removed. I will thus demonstrate the conditions under which the generalized Coase Theorem holds without the assumption of separable individual preference orderings.

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