Notes

The literature on the Coase Theorem is massive - according to Stigler (1988), Coase's (1960) paper is one of the most cited papers in the whole of the social sciences literature. Parisi (2008) provides a useful summary of the history of the debate over the result. The analysis developed in this chapter draws on various sources, including Bergstrom (1976), Ulen (1991), Hurwicz (1995), Chipman and Tian (2011), and Varian (2010, chapter 34). The analysis of the Coase Theorem in a three-person setting (with and without transaction costs) is explored by Aivazian and Callen (1981, 2003).

The diagrammatic analysis of the Coase Theorem with per unit transaction costs is implicit in most of the law and economics literature. The diagrammatic analysis of three-person cooperative games can be found in many good advanced microeconomic theory textbooks, including Mas-Colell, Whinston and Green (1995). Ordeshook (1986) provides an excellent explanation of the 0-1 normalisation of a cooperative game.

 
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