THE EXTENDED COASE THEOREM AND LONG RUN EQUILIBRIUM: THE NONEQUIVALENCE OF LIABILITY RULES AND PROPERTY RIGHTS.

This paper shows that the disagreement has its roots in a confusion of liability rules and property rights. A simple general equilibrium model is used to show that the Theorem is correct for property rights assignments, but not for liability rules. Liability rules are shown to be, in effect, incomplete property rights, which leads to inefficiency. [ABSTRACT FROM AUTHOR]