A reconsideration of the problem of social cost: Free riders and monopolists

Varadarajan Chari and Larry Jones

Economic Theory, 2000, vol. 16, issue 1, 22 pages

Abstract: One version of the Coase Theorem is, If property rights are fully allocated, competition leads to efficient allocations. This version implies that the public goods problem can be solved by allocating property rights fully. We show that this mechanism is not likely to work well in economies with global externalities because the privatized economy is highly susceptible to strategic behavior: The free-rider problem manifests itself as a complementary monopoly problem in an associated private goods economy. Thus, our work relates the validity of the Coase Theorem to the literature on the incentives for strategic behavior in economies with complementarities.

Keywords: Public goods; Externalities; Free-rider problem; Complementary monopoly. (search for similar items in EconPapers)
JEL-codes: D5 D6 H4 (search for similar items in EconPapers)
Date: 2000-04-14
Note: Received: 12 May 1999; revised version: 9 July 1999
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Citations: View citations in EconPapers (12)

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Working Paper: A reconsideration of the problem of social cost: free riders and monopolists (1991)
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