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Efefe

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  • August 2010
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A key point for implementing a successful Coasean solution relates to the emergence of private rights that can be defined, defended and divested or transferred at a reasonable cost (Yandle 1999). Explaining how rights were defined and enforced prior to the Vittel experiment constitutes a natural step in analysing a Coasean experiment.7 In France, the general rule is that groundwater is owned by surface landowners albeit with some restrictions, such as the public authorities’ right of pre-emption for the supply of water to a nearby city, or limits on the maximum well depth. In the case of mineral spring water, the bottler has the right to collect and exploit the water gushing on his lands. When groundwater migrates, it is to some extent a common good, owned by the different landowners located upon the watercourse (Gazzaniga 1990). In other words, landholders have the rights to influence the water quality, e.g. by their agricultural practices, if they meet conventional regulatory requirements, while the bottler has the right to exploit, e.g. by bottling the water gushing on his lands. Last but not least, in order to preserve the existence of the farming community, regulation precludes some transactions and prevents owners from changing the use of previously cultivated agricultural lands. Following Coase’s (1974) recommendations, at least five distinct social alternatives were available to Vittel: 1. Vittel does nothing. 2. Vittel forces farmers to change their practices by taking legal action. 3. Vittel relocates its activity by choosing new and non-contaminated springs. 4. Vittel buys all the lands around the site (a kind of ‘quasi-integration’). 5. Vittel achieves a contractual arrangement with farmers. A closer analysis of the situation shows that the first three alternatives would have been prohibitively costly, making Vittel a ‘prisoner’ to a combination of the last two solutions. 1. The first alternative was not suitable because the potential loss from doing...

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