Coase’s Theorem

Concept that economic efficiency is achieved best by full allocation of, and completely free trade in, property rights. It states that what really matters is that everything is owned by someone and that, initially, who owns what doesn’t matter. Based on two main ideas freedom of individual choice, and zero transaction costs (expenses associated with the process of buying and selling) it helps explain the unprecedented cost advantage online firms will have in the digital marketplace (where transaction costs are approaching zero) over the traditional firms. It has several other applications, such as in who pays for the pollution costs.

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