Coarse Theorem

Coarse Theorem
Coase Theorem is a concept that was developed by a Nobel laureate economist based in US Ronald Coarse in his book 'The problem of Social Costs'. Coase theorem is a legal economic theory that asserts that wherever exists comprehensive competitive markets without any cost of transaction, then a well-organized set of outputs and inputs to and from production-optimal distribution will be given a first priority in selection, irrespective of the division of the property rights (Coase 1960).
Coase theorem affirms that whenever there is involvement of property rights, the concerned parties naturally agree for an effective and an outcome that will mutually benefit both of them. For this mutual agreement to occur, the theorem emphasizes on the fact that the bargaining process must be costless because any cost associated with the bargaining which may include enforcement or meetings, may adversely affect the expected outcome. Therefore Coase theorem illustrates that in incidences where property rights are concerned, the parties involved do not need to essentially consider how the property rights are approved so long as they can easily trade to yield a mutually advantageous outcome to the benefit of all the parties (Coase 1960).
Coase theorem therefore act as an alternative to the regulations enacted by the government and in the provision of services. When property rights are deemed clear and are entitled to enforcement, when the cost of transaction is low and when there exists complete information of all the economic agents, government interventions in correcting externalities will be less needed since the economic agents can bargain by themselves and succeed in obtaining a mutual and beneficial allocation of resources without any intervention from government regulations. The allocation of resources is also stipulated in the theorem and provision of services is also catered for therefore reducing any potential conflict that could otherwise arise from the...