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
Y1 - 2012
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
VL - 93
SP - 169
EP - 176
JO - Journal of Environmental Management
JF - Journal of Environmental Management
SN - 0301-4797
IS - 1
ER -