Part 4/6:
However, while the Coase Theorem presents an appealing framework for resolving conflicts, it relies on several ideal conditions that often do not materialize in reality.
Negligible Bargaining Costs: The parties must engage in negotiations without incurring significant expenses, which is rarely the case in real disputes.
Complete Information: All parties involved must have access to complete and truthful information, allowing for informed decision-making.
Equal Power Dynamics: The negotiating parties cannot have an asymmetrical distribution of power, ensuring no party can impose unfavorable terms on the other.
These conditions exemplify why bargaining based on the Coase Theorem frequently fails to yield intended outcomes in real-world scenarios.