Question

Coase argued that Pigou neglected that

		Externalities exist.
		Transaction costs exist.
		Economic damages are impossible to evaluate.
		Costs resulting from externalities are jointly produced.
		Equilibrium may fail to exist.

Answer 1

Answer option 2)

transaction costs exist

pigou did argue that Externalities do exist, with pigouvian tax/ subsidy , effective socially effecient solution will be achieved

d says that Externalities could be internalized, the costs are jointly shared amongst the affected parties

damages could be evaluated, based on which pigouvian solution is possible

.

but central to coasian solution, is the property rights entitlement, & if transaction costs are negligible, then effecient eqm is possible.

so transaction costs , costs of coordination with multiple parties, act as impediment in reaching coasian bargaining.

which Pigou ignored