What are some of the limitations of the Coase theorem in practice?

What will be an ideal response?

Some limitations of the theorem are as follows. First, the Coase theorem works only if the transactions costs are low, which is unlikely if there are many bargaining parties. Second, private solutions to the problem of externalities will occur only if all parties to the agreement have full information about the costs and benefits associated with the externality. In reality, this may not be likely or may be difficult to ensure. Third, all parties must be willing to accept a reasonable agreement. For example, if those suffering from the effects of pollution do not have information on the costs of reducing pollution it is unlikely that parties can reach an agreement. Unreasonable demands can hinder an agreement.