Question

Under what circumstances will bargaining under a property rule not yield the efficient outcome?

Answer 1

Efficient outcome is not achieved when the bargaining is costly. In case that there's no capacity to deal, at that point an impartial arrangement can't be reached. For example, the organization may not be happy to converse with the individuals in the town without being compelled to. Constraining the connection will cost the town in legitimate charges. In case that the organization is delayed to act, at that point the hindrance of breathing the dirtied air for that timeframe may not make it beneficial for the town to seek after the negotiations. In the event that the negotiations will take an exceptionally prolonged stretch of time and because of lawful and different expenses cost more than $40,000 than, as indicated by Coase, the undertaking does not merit seeking after. This implies exchange costs are the constraining element for the Coase theorem. If managing the organization legitimately is excessively costly, at that point the town is further ahead evolving the 'property privileges' of the organization to contaminate the air.

As a rule however, at whatever point cost of managing the organization is more costly than the damage made by the externality at that point attempting to fix the issue isn't justified, despite any potential benefits.