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 Citations (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.

Original language	English
Journal	Journal of Environmental Management
Volume	93
Issue number	1
Pages (from-to)	169-176
Number of pages	8
ISSN	0301-4797
DOIs	https://doi.org/10.1016/j.jenvman.2011.09.004
Publication status	Published - Jan 2012

Access to Document

10.1016/j.jenvman.2011.09.004

Cite this

@article{b563496c9900491098f8106fd0c1c2e1,

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.",

author = "Jens Abildtrup and Frank Jensen and Alex Dubgaard",

year = "2012",

month = jan,

doi = "10.1016/j.jenvman.2011.09.004",

language = "English",

volume = "93",

pages = "169--176",

journal = "Journal of Environmental Management",

issn = "0301-4797",

publisher = "Academic Press",

number = "1",

}

TY - JOUR

T1 - Does the Coase theorem hold in real markets? An application to the negotiations between waterworks and farmers in Denmark

AU - Abildtrup, Jens

AU - Jensen, Frank

AU - Dubgaard, Alex

PY - 2012/1

Y1 - 2012/1

N2 - 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.

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.

U2 - 10.1016/j.jenvman.2011.09.004

DO - 10.1016/j.jenvman.2011.09.004

M3 - Journal article

SN - 0301-4797

VL - 93

SP - 169

EP - 176

JO - Journal of Environmental Management

JF - Journal of Environmental Management

IS - 1

ER -