Coase Theorem
The Coase theorem states that, if property rights are clearly defined and bargaining is costless, parties will negotiate an efficient outcome regardless of who initially holds the rights.
What is Coase Theorem?
Ronald Coase developed the idea partly when examining the regulation of radio frequencies, arguing that broadcasters could pay each other to avoid interference rather than relying on regulators. Its assumptions, zero transaction costs, perfect information and no market power, rarely hold, which limits its practical application, but it underpins market-based spectrum management such as auctions and trading.