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An Experimental Study of the Effect of Private Information in the Coase Theorem

McKelvey, Richard D. and Page, Talbot (1997) An Experimental Study of the Effect of Private Information in the Coase Theorem. Social Science Working Paper, 1018. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper investigates, in an experimental setting, the effect of private information on the Coase theorem's predictions of efficiency and allocative neutrality. For a two-person bargaining game, we find significantly more inefficiency and allocative asymmetry in the case of private information compared with the case of complete information. We also find substantial bargaining breakdown, which is not predicted by the Coase theorem. For the case of private information, the Coase theorem does not predict as well as a generalized version of the Myerson-Satterthwaite theorem, which predicts inefficiency, allocative non-neutrality in the direction of the disagreement point, and some bargaining breakdown.

Item Type:Report or Paper (Working Paper)
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Additional Information:The financial support of the National Science Foundation (Grant #SBR-9223701} is gratefully acknowledged. We thank Eugene Grayver for writing the computer programs to run the experiments, and we thank Tony Lancaster and Pedro Gozalo for helpful comments. Published as McKelvey, R.D., & Page, T. (2000). An experimental study of the effect of private information in the Coase theorem. Experimental Economics, 3(3), 187-213.
Group:Social Science Working Papers
Funding AgencyGrant Number
Subject Keywords:Coase theorem, Myerson-Satterthwaite theorem, two-person bargaining, private information, incomplete information, bargaining breakdown, cooperative and non-cooperative game theory
Series Name:Social Science Working Paper
Issue or Number:1018
Classification Code:JEL: C78 C92 D82
Record Number:CaltechAUTHORS:20170814-133129502
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80364
Deposited By: Jacquelyn Bussone
Deposited On:14 Aug 2017 20:48
Last Modified:03 Oct 2019 18:30

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