5. Negotiation and Private Bargains Coasian bargains most efficient means of achieving a social optimum was for the winners to compensate the losers Coase theorem the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own The initial distribution of rights does not matter for the market's ability to reach the efficient outcome5. Negotiation and Private Bargains ▪ Coasian bargains ▪ most efficient means of achieving a social optimum was for the winners to compensate the losers. ▪ Coase theorem ▪ the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own. ▪ The initial distribution of rights does not matter for the market’s ability to reach the efficient outcome