The Coase Theorem and the Game of Chicken

Note: this post was revised and updated on 13 April 2014.

There are only two parties to this particular dispute, a public agency and a private cattle rancher (thus so-called “transaction costs” are low), so what’s preventing them from negotiating a wealth-maximizing Coasean bargain?  Maybe the property rights in this particular case are not well-defined. Alternatively, perhaps this conflict should be modeled as a Game of Chicken, since one of the sides just swerved. Can you guess who the chicken was?

Addendum: here are a few other cinematic situations in which the Coase Theorem may not hold.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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