45. The Coase Theorem in The Edgeworth Box

In this video, I demonstrate what The Coase Theorem means in the context of an endowment economy. The discussion clarifies what the Coase Theorem can and cannot say with respect to the amount of the externality good that is consumed in equilibrium.
This video is part of my series of videos on microeconomics (links available at the video series website):
sites.google.co...
This video series both complements and supplements my textbook, "Intromediate Microeconomics," which is available for purchase at www.lulu.com/co... ($18 for an E-bundle with solutions).

[@MsCoillte]

Thank you for this, very nicely explained and I especially like your simple but effective example.

[@intromediateecon]

It is interesting that you bring this up. Now that I look at this example, the doctor and confectioner example isn't well represented by an endowment economy. In that example, the amount of income in the economy depends on the amount of noise... so the box should get wider / narrower as E changes. Maybe it is best to think of this as a separate example where doc doesn't like noise, confectioner does, and noise has no instrumental value for producing money.

[@jessicaalexandra8493]

Great video!

[@GoSolar]

Great video. One question: you seem to use the terms "wealth effects" and "income effects" interchangeably. Do you mean to use them interchangeably? Or is there a difference?

[@editor_real]

Can I ask one thing why doctor indifference is convex because hours of noise is a bad good for her

[@SomethingSoOriginal]

fantastic, i think im getting this.

[@madanmohan857]

thank

[@Harrymona]

really cool! Thanks a lot!

[@SomethingSoOriginal]

I hope you are still making videos. Could really do with some Macro stuff.

[@intromediateecon]

I think you mean the lower left corner (that's where the confectioner makes 0, and the doctor gets all of the money in the economy).

[@Jacob930321]

Why isn't E' put in the lower right corner? That's where the is zero hours of noise, and where the doctor makes his maximum living. (Why should candyman make $0? Well, the Candyman only makes $200, while the doctor makes $400, so the candyman's pay is too low to trade with the doctor - a trade would result in some of them being worse off.)