What happens when parties who are bargaining to eliminate an externality problem hold out for a better deal
A)Bargaining breaks down and the inefficient outcome persists.
B)The eventual outcome will maximize total well-being.
C)Transaction costs must be reduced as part of the bargain.
D)One party will gain more than the other party.

Question

Quizplus · Accepted Answer

If the parties hold out for a better deal, bargaining can break down and the externality problem will persist with an inefficient outcome.

What Happens When Parties Who Are Bargaining to Eliminate an Externality