Does the lack of trade matter?: the endowment effect and the Coase Theorem
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This paper studies the implications of the endowment effect on the Coase Theorem. The endowment effect places a sharp bend or kink in the traditional indifference curve. Applying this result to the traditional two-party exchange model using Edgeworth box analysis identifies and explains the large no-trade zone found in the endowment effect literature. The Edgeworth endowment model explicitly shows that the endowment effect does not result in an inefficient volume of trade as previously thought.
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Includes bibliographical references (leaves 25-26).
Rose, Cynthia Lynn (2002). Does the lack of trade matter?: the endowment effect and the Coase Theorem. Texas A&M University. Available electronically from