If bargaining is costless,the assignment of property rights for an externality
A)has no impact on the possibility of an efficient outcome and no distributional impact.
B)has no impact on the possibility of an efficient outcome but does have a distributional impact.
C)does have an impact on the possibility of an efficient outcome but has no distributional impact.
D)does have an impact on the possibility of an efficient outcome and does have a distributional impact.

Question

Quizplus · Accepted Answer

When bargaining is costless, the Coase Theorem suggests that the initial assignment of property rights does not affect the efficiency of the outcome (parties can negotiate to achieve efficiency), but it does affect the distribution of wealth because the party receiving the rights can negotiate from a position of strength.

If Bargaining Is Costless,the Assignment of Property Rights for an Externality