Econ 456 - 2.16.10 No class on Thursday Problem set due...

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2.16.10 No class on Thursday Problem set due Tuesday Feb. 23 Introduced technique of bargaining. Way to allocate property rights between people. Three methods of bargaining. If the two parties could bargain it did not matter whom the law favored. If the parties were unable to bargain, then the law affected efficiency. Transaction Costs- the costs of the exchange process, itself. 1) Search costs a. Costs associated with finding a buyer 2) Bargaining costs a. Ex. Converting currency 3) Enforcement costs a. Costs of making sure all the terms of the contract are followed through on Motivations for Coase (1960) We’ve assumed bargaining between parties is possible. What if it’s not (i.e. – what if TC’s>0)? o Animosity o No common language o Geography Ronald Coase Born in 1910- English economist and Nobel Prize winner in Economics, 1991 “the Nature of the Firm” 1937, and 1960 book. Economists prior to Coase took the economy’s institutions (e.g. – the legal environment) as given Coase explored economic institutions- their origins and impacts “The Problem of Social Cost” 1) highlights reciprocality of negative externality and stresses total analysis of the problem 2) introduces the coase theorem relating transaction costs, legal rulings, and
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This note was uploaded on 10/11/2010 for the course ECON 456 taught by Professor Holton during the Spring '10 term at University of Maryland Baltimore.

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Econ 456 - 2.16.10 No class on Thursday Problem set due...

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