Editing Coase theorem (section)

===Coasean bargaining in the presence of Pigouvian taxation===

Ian A. MacKenzie and Markus Ohndorf have conducted research on Coasean bargaining in the presence of a Pigouvian tax.<ref>{{cite journal |last1=MacKenzie |first1=Ian |last2=Ohndorf |first2=Markus |title=Coasean bargaining in the presence of Pigouvian taxation |journal=Journal of Environmental Economics and Management |date=January 2016 |volume=75 |pages=1–11 |doi=10.1016/j.jeem.2015.09.003 |bibcode=2016JEEM...75....1M |url=https://www.sciencedirect.com/science/article/pii/S0095069615000741 |access-date=12 September 2020 |ref=21|url-access=subscription }}</ref> This research stems from the common belief within Coasean perspectives that Pigouvian taxation creates distortions and therefore inefficiencies, instead of effectively resolving the problem in question. The research conducted shows that in the presence of a pre-existing Pigouvian tax, Coasean bargaining may be superior.<ref>{{cite journal |last1=MacKenzie |first1=Ian |last2=Ohndorf |first2=Markus |title=Coasean bargaining in the presence of Pigouvian taxation |journal=Journal of Environmental Economics and Management |date=January 2016 |volume=75 |pages=1–11 |doi=10.1016/j.jeem.2015.09.003 |bibcode=2016JEEM...75....1M |url=https://www.sciencedirect.com/science/article/pii/S0095069615000741 |access-date=12 September 2020 |ref=21|url-access=subscription }}</ref> The implications of this policy are regulation at both the federal and state level and environmental litigation and liability. This is because dual regulatory environments exist.

In order to examine whether the hypothesis that Coasean bargaining in the presence of a Pigouvian tax is superior to a scenario without taxation, MacKenzie and Ohndorf had to make certain assumptions. Firstly, they relaxed the assumption of property right allocations, and in doing so had a new take on the Buchanan – Stubblebine – Turvey Theorem.<ref>{{cite journal |last1=MacKenzie |first1=Ian |last2=Ohndorf |first2=Markus |title=Coasean bargaining in the presence of Pigouvian taxation |journal=Journal of Environmental Economics and Management |date=January 2016 |volume=75 |pages=1–11 |doi=10.1016/j.jeem.2015.09.003 |bibcode=2016JEEM...75....1M |url=https://www.sciencedirect.com/science/article/pii/S0095069615000741 |access-date=12 September 2020 |ref=21|url-access=subscription }}</ref> By relaxing this assumption, they are able to conclude that even with a Pigouvian tax levied, efficiency improvements can exist. By creating a more realistic environment with how property rights are allocated, MacKenzie and Ohndorf observed that gains from Coasean exchange are reduced by a Pigouvian tax. Furthermore, their research also shows that it is possible that a pre-existing tax can be efficiency enhancing in the case of environmental litigation and liability. This is because it softens the controversy and therefore, reduces overall spending in litigation.

Therefore, in summary, MacKenzie and Ohndorf's research provides an economic argument in support of Pigouvian taxation in the case where there is the potential for negotiation.