Per Tse (2025) The Coarse Theorem states that parties can achieve an efficient outcome (most optimal) if two conditions are met:
1. Transaction costs are low
2. Property rights are clearly defined
The Coarse Theorem Often Fails
The Coarse Theorem often fails because of high transaction costs, large numbers of people involved, and difficult negotiations between parties.
When the Coarse Theorem fails, government policies may be necessary, as often for an externality.
Works cited:
Tse, Harry. “Lecture-3 Equilibrium Elasticity.” 2025.
