Uncertain externalities, liability rules, and resource allocation

Journal Article · Thu Jun 01 00:00:00 EDT 1978 · Am. Econ. Rev.; (United States)

OSTI ID:7061293

Greenwood, P H ^[1]; Ingene, C A

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1. Univ. of New Hampshire, Durham

The authors extend the ''Coase Theorem'' by analyzing the effects of one firm's activities on another firm in cases of uncertain externality, legal liability, and resource allocation. A mathematical model is used to examine, in terms of risk acceptance and profit maximizing, a merger of two firms and the ensuing bargaining over one firm's pollution output. This costless bargaining is generally accepted as determining the socially optimal level of resource allocation and is independent of liability assignment. However, the authors conclude that liability rules in an uncertain world can determine resource allocation as much as bargaining skills. Government intervention in the form of tax and subsidy incentives can intervene in favor of increased output. 14 references.

• OSTI ID: 7061293
• Journal Information: Am. Econ. Rev.; (United States), Journal Name: Am. Econ. Rev.; (United States) Vol. 68:3; ISSN AERNA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
290400 -- Energy Planning & Policy-- Energy Resources
293000 -- Energy Planning & Policy-- Policy
Legislation
& Regulation
ALLOCATIONS
CIVIL LIABILITY
ECONOMIC ANALYSIS
ECONOMIC POLICY
ECONOMICS
FINANCIAL INCENTIVES
GOVERNMENT POLICIES
INCOME
INDUSTRY
LEGAL ASPECTS
LIABILITIES
MANUFACTURING
MATHEMATICAL MODELS
OPTIMIZATION
POLLUTION REGULATIONS
REGULATIONS
RESOURCE CONSERVATION
RESOURCES
RISK ASSESSMENT
TAXES