A reconsideration of the problem of social cost: Free riders and monopolists

One version of the Cease Theorem is, If property rights are fully allocated , competition leads to efficient allocations. This version implies that the public goods problem can be solved by allocating property rights fully. We show that this mechanism is not likely to work well in economies with glob al externalities because the privatized economy is highly susceptible to st rategic behavior: The free-rider problem manifests itself as a complementar y monopoly problem in an associated private goods economy. Thus, our work r elates the validity of the Cease Theorem to the literature on the incentive s for strategic behavior in economies with complementarities.