Case Study: DuPont's PFOA Pollution and Coasean Bargaining Failure

Transaction Costs in Coasean Bargaining

Addressing Market Failures via Institutional Reform and Government Intervention

A new airport is built near a large, pre-existing suburban community of 10,000 households. The noise from planes taking off and landing has significantly reduced the quality of life for the residents. The airport authority and a residents' association attempt to negotiate a solution. The residents' association finds it nearly impossible to get all 10,000 households to agree on a unified demand or to contribute to the legal and administrative fees required for the negotiation. Based on this situation, which of the following best identifies the primary practical obstacle to reaching an efficient private agreement?

Analyzing Barriers to Private Environmental Negotiation

Identifying Barriers to Private Negotiation

Match each scenario with the primary obstacle to a successful private negotiation that it illustrates.

If property rights are clearly defined and legally enforceable for an externality-producing activity, private bargaining between the affected parties is guaranteed to result in an efficient outcome.

Evaluating Critical Barriers to Private Negotiation

Analyzing Bargaining Failures in the Digital Age

A small, independent coffee shop discovers that a large corporation plans to build a factory upstream on the river that supplies the town's water. The coffee shop owner obtains internal corporate documents, not yet public, indicating the factory will discharge a chemical that, while not yet regulated, is known to impart a bitter taste to water. The corporation is unaware that the coffee shop owner has this information. The town has no specific laws regarding this particular chemical discharge. In this situation, which combination of factors presents the most significant obstacles to reaching an efficient private agreement between the coffee shop and the corporation?

Evaluating the Viability of a Private Bargaining Solution

Evaluating a Bargaining Impasse

Limitations of Coasean Bargaining: Complexity and Number of Parties

Alternative Economic Instruments for Pollution Control When Coasean Bargaining Fails