Coase Theorem Challenged: Unstable Allocations Threaten Optimal Resource Distribution
The Coase theorem suggests that in situations with no transaction costs, the end result is fair and isn't influenced by who legally owns what. Some argue this isn't always true. A study created a game with 3 players, showing that under one set of rules, the fair outcome is unstable (not likely to stay fair), but under different rules, it stays stable. In this game example, the fair choice being stable is likely, but to prove the Coase theorem is right, they need to show legal neutrality also stands. For this particular three-person game, sometimes both parts of the Coase theorem are correct only 3 out of 8 times.