In a world with no transactions costs there is no reason to choose between the Coasian
Pigovian treatments: both come down to finding a way to achieve an efficient allocation
dominates some initial endowment. A mechanism that solves one problem will solve
I have described one such mechanism, the compensation mechanism here. This is, however,
only one example among many. I think that the compensation mechanism has nice theoretical
properties. The question is, how does it work in practice? I am currently carrying
out a series of
laboratory experiments to investigate this question.