Transaction Costs and the Robustness of the Coase Theorem

Nabil Al-Najjar, Luca Anderlini & Leonardo Felli ()
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Nabil Al-Najjar, Luca Anderlini & Leonardo Felli: Department of Economics, Georgetown University, http://www.georgetown.edu/faculty/la2/
Authors registered in the RePEc Author Service: Luca Anderlini and Leonardo Felli ()

Working Papers from Georgetown University, Department of Economics

Abstract: We develop a model of undescribable events. Examples of events that are well understood by economic agents but are prohibitively difficult to describe in advance abound in real-life. This notion has also pervaded a substantial amount of economic literature. We put forth a model of such events using a simple co-insurance problem as backdrop. Undescribable events in our model are understood by economic agents --- their consequences and probabilities are known --- but are such that every finite description of such events necessarily leaves out relevant features that have a non-negligible impact on the parties' expected utilities. We also show that two key ingredients of our model --- probabilities that are finitely additive but fail countable additivity, and a state space that is small (discrete in our model) in a measure-theoretic sense --- are necessary ingredients of any model of undescribable events that delivers our results.

Keywords: Undescribable Events; Incomplete Contracts; Finite Invariance; Fine Variability. (search for similar items in EconPapers)
JEL-codes: C69 D81 D89 (search for similar items in EconPapers)

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Related works:
Working Paper: Transaction Costs and the Robustness of the Coase Theorem (2001)
Working Paper: Transaction Costs and the Robustness of the Coase Theorem
Journal Article: Transaction Costs and the Robustness of the Coase Theorem (2006)
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