The Coase Theorem and the Core Revisited

Posted: 2 Jul 1998

See all articles by Varouj A. Aivazian

Varouj A. Aivazian

University of Toronto - Rotman School of Management

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Date Written: January 1996

Abstract

This paper clarifies some of the issues raised by the original Aivazian-Callen-Coase debate concerning the Coase Theorem and the empty core. Despite the misconception by some legal scholars that Coase's limiting argument resolves the empty core issue, it is shown why economic scholars tend to disagree. Furthermore, contrary to Coase's conjecture that the empty core problem disappears in a world of transactions costs, it is shown that transactions costs exacerbate the problem of the empty core. Finally, this paper addresses the Mueller dual externality criticism of the Aivazian-Callen empty core example.

Suggested Citation

Aivazian, Varouj A. and Callen, Jeffrey L., The Coase Theorem and the Core Revisited (January 1996). Available at SSRN: https://ssrn.com/abstract=10039

Varouj A. Aivazian

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Department of Economics
Toronto, Ontario M5S 3E6
Canada
416-978-2375 (Phone)
416-978-5433 (Fax)

Jeffrey L. Callen (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

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