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Coase Theorem: The Coase Theorem, proposed by economist Ronald Coase, asserts that in the absence of transaction costs, bargaining between parties will lead to an efficient allocation of resources regardless of the initial assignment of property rights, as long as property rights are well-defined and parties can negotiate freely. The Coase theorem explains for the first time why companies are formed.
Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

Author Concept Summary/Quotes Sources

Daniel Kahneman on Coase Theorem - Dictionary of Arguments

Parisi I 91
Coase theorem/Kahneman/Sullivan/Holt: (...) what transaction costs are sufficient to defeat efficient allocation under the Coase Theorem.
Endowment effect: One consideration is the endowment effect - the tendency of property owners to value assets more than prospective buyers (Kahneman et al., 1991)(1).* Merely changing the basic experiment so that bargaining concerns the controller’s ownership of a tangible chocolate bar significantly reduces subjects’ ability to negotiate an efficient reallocation of property rights (Kahneman, Knetsch, and Thaler, 1990)(3).
Efficiency: Experiments also show reduced allocative efficiency when the process of bargaining entails explicit negotiation costs (Rhoads and Shogren, 1999)(4) and when negotiators operate under asymmetric information (McKelvey and Page, 2000)(5).
Uncertainty: Interestingly, there is some evidence that uncertain property rights may actually increase efficiency by incentivizing negotiation as opposed to entrenchment (Cherry and Shogren, 2005(6); see also Croson and Johnston, 2000(7)). >Coase theorem/Economic theories.

* Experimental evidence is not fully supportive of the endowment effect. For an extensive survey and critique, see Klass and Zeiler (2013)(2).

1. Kahneman, D., J. L. Knetsch, and R. H. Thaler (1991). “Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias.” Journal of Economic Perspectives 5(1): 193–206.
2. Klass, G. and K. Zeiler (2013). “Against Endowment Theory: Experimental Economics and Legal Scholarship.” UCLA Law Review 61: 2–64.
3. Kahneman, D., J. L. Knetsch, and R. H. Thaler (1990). “Experimental tests of the Endowment Effect and the Coase Theorem.” Journal of Political Economy 98(6): 1325–1348.
4. Rhoads, T. A. and J. F. Shogren (1999). “On Coasean Bargaining with Transaction Costs.” Applied Economics Letters 6: 779–783.
5. McKelvey, R. D. and T. Page (2000). “An Experimental Study of the Effect of Private Information in the Coase Theorem.” Experimental Economics 3(3): 187–213.
6. Cherry, T. L. and J. F. Shogren (2005). “Costly Coasean Bargaining and Property Right Security.” Environmental & Resource Economics 31(3): 349–367.
7. Croson, R. and J. S. Johnston (2000). “Experimental Results on Bargaining Under Alternative Property Rights Regimes.” Journal of Law, Economics, and Organization 16(1): 50–73.

Sullivan, Sean P. and Charles A. Holt. „Experimental Economics and the Law“ In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

EconKahne I
Daniel Kahneman
Schnelles Denken, langsames Denken München 2012

Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017

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