Investments glossary

Coase Theorem

Coase Theorem is a legal and economic theory developed by economist Ronald Coase that affirms that where there are complete competitive markets with no transactions costs, an efficient set of inputs and outputs to and from production-optimal distribution will be selected, regardless of how property rights are divided. Further, the Coase Theorem asserts that if conflict arises over property rights under these assumptions, then parties will tend to settle on the efficient set of inputs and output.

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