Does the Coase theorem hold in real markets? An application to the negotiations between waterworks and farmers in Denmark

Jens  Abildtrup; Frank Jensen; Alex Dubgaard

doi:10.1016/j.jenvman.2011.09.004

Does the Coase theorem hold in real markets? An application to the negotiations between waterworks and farmers in Denmark

Jens Abildtrup, Frank Jensen, Alex Dubgaard

14 Citationer (Scopus)

Abstract

The Coase theorem depends on a number of assumptions, among others, perfect information about each other’s payoff function, maximising behaviour and zero transaction costs. An important question is whether the Coase theorem holds for real market transactions when these assumptions are violated. This is the question examined in this paper. We consider the results of Danish waterworks’ attempts to establish voluntary cultivation agreements with Danish farmers. A survey of these negotiations shows that the Coase theorem is not robust in the presence of imperfect information, non-maximising behaviour and transaction costs. Thus, negotiations between Danish waterworks and farmers may not be a suitable mechanism to achieve efficiency in the protection of groundwater quality due to violations of the assumptions of the Coase theorem. The use of standard schemes or government intervention (e.g. expropriation) may, under some conditions, be a more effective and cost efficient approach for the protection of vulnerable groundwater resources in Denmark.

Originalsprog	Engelsk
Tidsskrift	Journal of Environmental Management
Vol/bind	93
Udgave nummer	1
Sider (fra-til)	169-176
Antal sider	8
ISSN	0301-4797
DOI	https://doi.org/10.1016/j.jenvman.2011.09.004
Status	Udgivet - jan. 2012

Adgang til dokumentet

10.1016/j.jenvman.2011.09.004

Citationsformater

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title = "Does the Coase theorem hold in real markets? An application to the negotiations between waterworks and farmers in Denmark",

abstract = "The Coase theorem depends on a number of assumptions, among others, perfect information about each other{\textquoteright}s payoff function, maximising behaviour and zero transaction costs. An important question is whether the Coase theorem holds for real market transactions when these assumptions are violated. This is the question examined in this paper. We consider the results of Danish waterworks{\textquoteright} attempts to establish voluntary cultivation agreements with Danish farmers. A survey of these negotiations shows that the Coase theorem is not robust in the presence of imperfect information, non-maximising behaviour and transaction costs. Thus, negotiations between Danish waterworks and farmers may not be a suitable mechanism to achieve efficiency in the protection of groundwater quality due to violations of the assumptions of the Coase theorem. The use of standard schemes or government intervention (e.g. expropriation) may, under some conditions, be a more effective and cost efficient approach for the protection of vulnerable groundwater resources in Denmark.",

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AB - The Coase theorem depends on a number of assumptions, among others, perfect information about each other’s payoff function, maximising behaviour and zero transaction costs. An important question is whether the Coase theorem holds for real market transactions when these assumptions are violated. This is the question examined in this paper. We consider the results of Danish waterworks’ attempts to establish voluntary cultivation agreements with Danish farmers. A survey of these negotiations shows that the Coase theorem is not robust in the presence of imperfect information, non-maximising behaviour and transaction costs. Thus, negotiations between Danish waterworks and farmers may not be a suitable mechanism to achieve efficiency in the protection of groundwater quality due to violations of the assumptions of the Coase theorem. The use of standard schemes or government intervention (e.g. expropriation) may, under some conditions, be a more effective and cost efficient approach for the protection of vulnerable groundwater resources in Denmark.

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